|

EUR/GBP extends bounce off yearly low to 0.8550 as ECB rate hike concerns challenge BoE hawks

  • EUR/GBP picks up bids to refresh intraday high, stretches recovery from 10-month low.
  • ECB policymakers suggest higher rates despite softer German PPI.
  • UK’s two-year borrowing costs jump to 15-year high, suggesting more power for BoE hawks.
  • Risk catalysts eyed ahead of Wednesday’s British inflation.

EUR/GBP renews intraday high near 0.8550 as it picks up bids to stretch the previous day’s rebound from the lowest levels since August 2022 heading into Tuesday’s London open. In doing so, the cross-currency pair justifies hawkish concerns from the European Central Bank (ECB) while ignoring German inflation clues and the expectations of the Bank of England (BoE) rate hikes.

Germany’s Producer Price Index (PPI) rises by 1.0% for May versus 1.7% YoY expected and 4.1% prior whereas the monthly figures spread disappointment with -1.4% mark compared to -0.7% market forecasts and 0.3% previous readings. It’s worth noting that statistics from Germany and the Eurozone have recently flagged concerns of the economic slowdown in the old continent and challenged the Euro bulls.

Even so, European Central Bank (ECB) policymaker Peter Kazimir said on Monday, “We need to raise rates again in July.” On the same line, ECB Chief Economist Philip Lane said that another rate hike in July seemed appropriate but noted that the decision in September will depend on incoming data, per Reuters. Furthermore, ECB Governing Council member Isabelle Schnabel also said, “Risks to the inflation outlook are tilted to the upside.” ECB’s Schnabel also cited the need to keep raising interest rates until seeing convincing evidence that developments in underlying inflation are consistent with a return of headline inflation to 2%.

On the other hand, The Times came out with the news suggesting that the UK government’s two-year borrowing costs have risen above 5% for the first time in 15 years amid mounting expectations that the Bank of England (BoE) will lift interest rates again this week as it battles to contain inflation. The news also added that the Gilt yields, which move inversely to the British Pound prices, have soared in recent days as traders bet that Threadneedle Street will need to raise rates further and will keep them higher for longer than had been anticipated.

Elsewhere, the fears of slower economic recovery in the UK join the US-China tension to weigh on the sentiment and allow the Euro pair to remain on the front foot versus the Pound Sterling. While portraying the mood, S&P500 Futures print mild losses whereas the US 10-year and two-year Treasury bond yields grind near 3.82% and 4.75% respectively by the press time, after rising in the last two consecutive days.

Moving on, a light calendar in Eurozone and the UK may restrict immediate EUR/GBP moves ahead of Wednesday’s UK inflation data and Thursday’s Bank of England (BoE) Monetary Policy Meeting.

Technical analysis

Oversold RSI conditions triggered the EUR/GBP pair’s rebound from a 13-day-old falling support line, close to 0.8510 by the press time. However, the quote’s recovery remains elusive unless it crosses the two-month-old resistance line, near 0.8580 at the latest.

Additional important levels

Overview
Today last price0.8549
Today Daily Change0.0013
Today Daily Change %0.15%
Today daily open0.8536
 
Trends
Daily SMA200.8608
Daily SMA500.8705
Daily SMA1000.8768
Daily SMA2000.8752
 
Levels
Previous Daily High0.8548
Previous Daily Low0.8518
Previous Weekly High0.8613
Previous Weekly Low0.8522
Previous Monthly High0.8835
Previous Monthly Low0.8583
Daily Fibonacci 38.2%0.8537
Daily Fibonacci 61.8%0.853
Daily Pivot Point S10.8521
Daily Pivot Point S20.8505
Daily Pivot Point S30.8491
Daily Pivot Point R10.855
Daily Pivot Point R20.8564
Daily Pivot Point R30.858

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD climbs toward 1.1800 on broad USD weakness

EUR/USD gathers bullish momentum and advances toward 1.1800 in the second half of the day on Tuesday. The US Dollar weakens and helps the pair stretch higher after the employment report showed that Nonfarm Payrolls declined by 105,000 in October before rising by 64,000 in November.

GBP/USD climbs to fresh two-month high above 1.3400

GBP/USD gains traction in the American session and trades at its highest level since mid-October above 1.3430. The British Pound benefits from upbeat PMI data, while the US Dollar struggles to find demand following the mixed employment figures and weaker-than-forecast PMI prints, allowing the pair to march north.

Gold extends its consolidative phase around $4,300

Gold trades in positive above $4,300 after spending the first half of the day under bearish pressure. XAU/USD capitalizes on renewed USD weakness after the jobs report showed that the Unemployment Rate climbed to 4.6% in November and the PMI data revealed a loss of growth momentum in the private sector in December. 

US Retail Sales virtually unchanged at $732.6 billion in October

Retail Sales in the United States were virtually unchanged at $732.6 billion in October, the US Census Bureau reported on Tuesday. This print followed the 0.1% increase (revised from 0.3%) recorded in September and came in below the market expectation of +0.1%.

Ukraine-Russia in the spotlight once again

Since the start of the week, gold’s price has moved lower, but has yet to erase the gains made last week. In today’s report we intend to focus on the newest round of peace talks between Russia and Ukraine, whilst noting the release of the US Employment data later on day and end our report with an update in regards to the tensions brewing in Venezuela.

BNB Price Forecast: BNB slips below $855 as bearish on-chain signals and momentum indicators turn negative

BNB, formerly known as Binance Coin, continues to trade down around $855 at the time of writing on Tuesday, after a slight decline the previous day. Bearish sentiment further strengthens as BNB’s on-chain and derivatives data show rising retail activity.