EUR/GBP Price Down at 0.8450 After Eurozone Data, Still Rangebound
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- EUR/GBP remains depressed around the mid-0.8400 area despite the hawkish stance by ECB.
- GBP bulls have overcome the Euro as BoE seems poised to hike rates.
- Brexit concerns may not allow the GBP bulls to rally easily.
During the first half of European trading, the EUR/GBP price remained low, hovering around daily lows just above the mid-0.8400.
After the Euro hit two-week highs the previous day, the cross struggled to capitalize on the strong move by the central bank but was instead pressured by supply during the final day of trading. Market expectations of an increase in interest rates by the Bank of England at their next meeting explain the relative superiority of the British pound. Moreover, Treasury Secretary Rishi Sunak, who delivered the UK’s annual budget on Wednesday, backed up the speculation with an upbeat economic assessment.
As a result of Christina’s cautious comments at a press conference following the ECB meeting on Thursday, the single currency was under pressure. The IMF chief acknowledged inflationary pressures were higher than expected but downplayed the need to raise interest rates. Despite this, investors were not convinced that a fourth straight tightening in monetary policy in October is appropriate given the continued increase in consumer prices in the euro area.
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Eurostat reported on Friday that the eurozone’s CPI rose to a 13-year high of 4.1% for the current month. This was a significant acceleration from 3.4% in September. The expected rise was 3.7%. Additionally, the headline figure exceeded the ECB’s target of 2%. A slight disappointment in German growth is overshadowed by this, as well as stronger-than-expected eurozone GDP growth.
Consequently, the common currency should weaken. As a result, Brexit jitters may prevent pound bulls from aggressive rates and contain a significant drop in the EUR/GBP cross. In addition, UK-France tensions over post-Brexit fishing rights and a new dispute over the Northern Ireland Protocol continue to concern investors.
EUR/GBP price technical outlook: Looks depressed at 0.8450
Technically, the EUR/GBP cross may have bottomed out and favored bull traders with a move above the top of the weekly range overnight. Therefore, any subsequent decline can still be viewed as a buying opportunity and remain limited. However, everything appears to be set for another short-term rally, which should allow the bulls to pull back and re-capture the key psychological level of 0.8500.
