• UK headline CPI holds steady at 2.4% y/y in May; PPI beats market estimates.
• Fading BoE rate hike prospects kept exerting pressure on GBP.
The EUR/GBP cross regained positive traction on Wednesday and held on to its gains above the 0.8800 handle post-UK data.
Although the UK PM Theresa May avoided a defeat in a key Brexit vote on Tuesday, the British Pound kept losing ground and helped the cross to reverse all of its previous session’s sharp retracement slide from the very important 200-day SMA.
Against the backdrop of the recent slew of weaker UK macro data, the UK headline CPI missed expectations and held steady at a multi-month low level of 2.4% in May, further dampening prospects for an eventual BoE rate hike move in the near future.
The disappointing yearly reading partly offsets a hotter than expected PPI figures and did little to provide any meaningful respite to the GBP bulls, albeit helped limit further downside, at least for the time being.
Meanwhile, a subdued action around the shared currency did little to influence the price-action, with the GBP dynamics acting as an exclusive driver of the pair’s momentum ahead of the highly anticipated ECB monetary policy meeting on Thursday.
Technical levels to watch
Any subsequent up-move might continue to confront fresh supply near the 0.8830-40 region, above which the cross seems all set to aim towards reclaiming the 0.8900 handle. On the flip side, 0.8780-70 area might continue to protect the immediate downside, which if broken might negate any further up-move and turn the pair vulnerable to head back towards testing 0.8740-35 intermediate support en-route the 0.8700 handle.
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