EUR/GBP fizzles upside momentum below 0.9000 as UK inflation data matches forecasts

EUR/GBP declines to 0.8970, still up 0.13%, after the UK’s May month inflation data matched forecasts during the early Wednesday. In doing so, the pair defies the previous day’s pause to a five-day winning streak.

The UK’s headline Consumer Price Index for May came in as 0.5%, meeting forecasts,   versus 0.8% prior on YoY. Further, the Core CPI that excludes volatile food and energy items grew by 1.2% on a yearly basis compared to 1.3% market consensus and 1.4% previous readouts.

Read: UK annualized CPI meets estimates with 0.5% in May, GBP/USD revisits highs

Although the readings increase the odds of the BOE’s additional stimulus, backed by the recently mixed British data, EUR/GBP steps back from the intraday high of 0.8970 after the release.

The pair traders also remain cautious as fears of the coronavirus (COVID-19) wave 2.0 gains momentum. Increasing numbers from Beijing and a hike in pandemic data from Germany, Japan and some of the US states renew the market’s pessimism. In doing so, investors seem to pay little heed to the UK’s testing results of the second vaccine, namely Dexamethasone, which has been recently cheered by the World Health Organization’s (WHO) Director Tedros Adhanom.

On a different note, British policymakers are actively preparing for the post-Brexit trade relations with the rest of the world. Australia and New Zealand are on their radars after the differences with the European Union seem to have been cut off-late. Elsewhere, German Intelligence suggests Iran is undertaking suspicious activities to prepare banned weapons. Earlier during the day, US Secretary of State Mike Pompeo criticized the rogue nation’s refrain to let the international authority check two of its nuclear sites.

Amid all these catalysts, the market’s risk-tone part ways from the previous two-day optimism. As a result, the US 10-year treasury yields and the stock futures print mild losses as we write.

Considering the lack of major data/events, the pair moves are mostly expected to rely on the virus updates and/or geopolitical news for fresh impulse. Additionally, the final prints of the EUrozone CPI, expected to match an initial forecast of 0.1% YoY, as well as a speech by the ECB Vice President Luis de Guindos, will also entertain the traders.

Technical analysis

A short-term triangle formation between 0.8920 and 0.9020 seems to restrict the EUR/GBP pair’s near-term moves. An ascending trend line since February 18, at 0.8905 now, offers additional support to the quote.