|

EUR/GBP gains momentum on quiet Monday, bulls step in

  • The EUR/GBP stands at 0.8555 in Monday's session, jumping above the 20-day SMA.
  • Sticky European inflation may push the ECB to a more aggressive stance toward the easing cycle.
  • The week’s highlight will be the British and the EU’s Manufacturing PMIs from February.
  • As long as markets bet on the BoE starting its easing later than the ECB the upside may be limited.

In Monday's session, the EUR/GBP was at 0.8555 amid anticipation of possible shifts in European Central Bank (ECB) policy, as recent indicators point towards revitalized wage growth and a surprising uptick in core inflation. However, markets are still betting on a sooner easing-cycle start than the Bank of England (BoE) which gives the Pound an advantage over the euro.

In the Euro area, the inflation trend reversed partially in January when core inflation was above expectations at 3.3%, indicative of a strengthening Eurozone economy. There is speculation that resilient wage growth, as suggested by the ECB’s wage tracker, may contribute to stickier inflation which may push the bank to hold rates for longer. In that sense, if the European economies show strengths as the British economy, the Euro could partially strengthen. However, markets are still betting between 125-100 bps of easing from the ECB in 2024, vs the sub-100 bps of cutting from the BoE which could limit the upside. Incoming data will set the timing of the easing, and this week, markets will get key Manufacturing PMI readings from both economic blocks from February which could ignite volatility in the pair.

EUR/GBP technical analysis

Examining the Relative Strength Index (RSI), the EUR/GBP pair hints at a slightly positive outlook as the index hovers around the central mark, indicating restrained buying momentum. Recent transitions further validate this tilt, with the RSI shifting from deep negative to the 50 mark, indicating a possible shift in buyer power. However, the shifting trend is not markedly aggressive, suggesting a scope for volatility.

On the other hand, the Moving Average Convergence Divergence (MACD) histogram, a measure to evaluate momentum, highlights green bars, which underscores growing buying momentum.

Finally, the pair's position against its Simple Moving Averages (SMAs) implies a mixed bias in the short term. Despite being above the 20-day SMA, the pair still lingers below the 100 and 200-day SMA, signaling a considerable bearish presence. Hence, for the upward momentum to persist, bulls must increase their efforts.

EUR/GBP daily chart

Author

Patricio Martín

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

More from Patricio Martín
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 holds steady below 1.1800

EUR/USD moves sideways in a narrow channel below 1.1800 as the market volatility remains low ahead of the New Year holiday. On Tuesday, investors will pay close attention to the minutes of the Federal Reserve's December policy meeting.

GBP/USD retreats below 1.3500 as trading conditions remain thin

GBP/USD corrects lower after posting strong gains in the previous week and trades below 1.3500 on Monday. With the action in financial markets turning subdued following the Christmas holiday, however, the pair's losses remain limited.

Gold holds above $4,300 after setting yet another record high

Spot Gold traded as high as $4,550 a troy ounce on Monday, fueled by persistent US Dollar weakness and a dismal mood. The XAU/USD pair was hit sharply by profit-taking during US trading hours and retreated towards $4,300, where buyers reappeared.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is.  Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries (DAT), adoption of AI and tokenization of Real-World-Assets (RWA).

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is.  Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries (DAT), adoption of AI and tokenization of Real-World-Assets (RWA).