- EUR/GBP witnessed some profit-taking on Tuesday and retreated further from three-month tops.
- The shared currency failed to gain any meaningful traction following the release of Eurozone CPI.
- The sterling was pressured by a combination of factors and helped limit the downside for the cross.
The EUR/GBP cross maintained its offered tone through the mid-European session and refreshed daily lows, around the 0.9115-20 region in the last hour, albeit lacked follow-through.
The cross extended the previous day's modest intraday pullback from the three-month high level of 0.9175 and witnessed some follow-through profit-taking on Tuesday. The downtick was sponsored by the emergence of some heavy selling around the shared currency, which failed to benefit from hotter-than-expected Eurozone consumer inflation figures for June.
According to the preliminary estimates, the headline Eurozone CPI rose by 0.3% YoY during the reported month as against 0.1% expected and previous. Separately, core CPI (excluding food and energy costs) matched consensus estimates and edged lower to 0.8% YoY rate from 0.9% previous. The data, however, failed to impress bulls or provide any impetus to the cross.
On the other hand, the British pound remained depressed amid doubts over Britain’s ability to pay for a massive boost to public spending. The worries surfaced after the UK Prime Minister Boris Johnson promised to double public investments. Johnson on Tuesday set out plans on how the government will help the UK recover from the pandemic with £5bn for infrastructure projects.
This comes amid persistent Brexit uncertainties, which coupled with weaker-than-anticipated UK GDP print took its toll on the sterling. This, in turn, helped limit any deeper losses and held the EUR/GBP cross well within the previous day's broader trading range.
Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent leg up might have already run out of the steam and positioning for any further near-term corrective slide for the EUR/GBP cross.
Technical levels to watch
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