EUR/GBP holds above key support as UK economic concerns pressure Sterling

• EUR/GBP holds above key sypport at 0.8623 as bulls defend short-term trend.
• Economic and fiscal concerns in the UK put pressure on the Pound Sterling, while the Euro hinges on any advance regarding EU-US trade talks.
• Interest rate expectations, with the ECB expected to keep borrowing costs steady and the BoE to slash them, could serve as an additional catalyst for EUR/GBP.

The Euro (EUR) is edging higher against thePound Sterling (GBP) on Friday as rising expectations that the Bank of England (BoE) may cut interest rates and fiscal concerns place pressure on Sterling.

At the time of writing, EUR/GBP is trading near 0.8640 as both technical and fundamental factors remain in favour of bulls.

Fundamentally, the outlook remains supportive of the Euro. Thursday's softer-than-expected UK labor market data increased expectations for a potential BoE rate cut.

Meanwhile, the European Central Bank (ECB) has remained cautious but not explicitly dovish after inflation data failed to show signs of easing this week, providing a relative advantage to the Euro.

With no significant economic data due on Friday, market moves are likely to be driven by sentiment and positioning ahead of the August tariff deadline. Any developments arising from the US-EU trade talks that took place in Washington this week - or lack of progress - will likely serve as an additional catalyst for the Euro and the EUR/GBP pair.

EUR/GBP holds above key support as bulls defend short-term trend

EUR/GBP trades just above support at 0.8623, coinciding with the 23.6% Fibonacci retracement level of the March low-April high move.

After failing to test psychological resistance at the 0.8700 level, the longer upper wick that appeared at the top of the daily candle on Wednesday reflected a firm rejection from bears.

However, the downside move has been limited. Price action continues to hold above the 20-day Simple Moving Average (SMA) at 0.8612, the 50-day SMA at 0.8512 and the 100-day SMA at 0.8486. While these levels are providing support for the pair, they also indicates that the short-term trend remains bullish.

The Relative Strength Index (RSI) at 61 suggests that momentum remains in favour of the bulls, without entering overbought territory.

If the price continues to hold above 0.8623 and the 20-day MA, the bullish momentum is likely to persist.

EUR/GBP daily chart

A breakout above Wednesday's high of 0.8698 could lead to a retest of the April high at 0.8739, especially if the RSI pushes higher toward 70.

On the downside, a sustained break below 0.8623 would expose the pair to deeper retracements, with support levels at the 32.8% Fibonacci level of 0.8551, the 50-day SMA and the 100-day SMA.

A drop below this region would suggest a potential shift in trend, targeting the 61.8% Fibonacci level at 0.8435.