Through Wednesday's early European session, the EURGBP cross struggles to capitalize on the previous day's small gains and oscillates in a narrow trading zone just above the 0.8700 level.

The shared currency continues to gain from rumors of a more aggressive policy tightening by the European Central Bank (ECB), which provides support for the EURGBP cross. Several ECB policymakers have stated that higher rates are required for a longer period of time in order to return double-digit inflation in the Eurozone to the aim of 2%. This, in turn, raises the rate-sensitive yield on two-year German bonds to its highest level since December 2008, and is viewed as a tailwind for the Euro.

On the other hand, the recent decline of the US Dollar provides support for the British Pound, which keeps a lid on the EURGBP cross. In spite of this, the Bank of England's pessimistic prognosis for the UK economy could weaken the Pound and boost the cross's upside potential. It is important to remember that the United Kingdom's central bank anticipates a recession to endure for the entirety of 2023 and the first part of 2024, indicating a lower terminal peak than is now priced into the markets.

The fundamental environment indicates that the path of least resistance for the EURGBP cross is to the upside, and any decline below the round number 0.8700 could be viewed as a buying opportunity. Before placing fresh wagers in the absence of market-moving economic data, bulls may await persistent rise beyond the 0.8775 to 0.8780 resistance zone. The market's attention will now shift to Friday's release of the Preliminary UK Q3 GDP data.

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