EUR/GBP returns above 0.8600 on hawkish ECB rhetoric and soft UK data

• The Euro is trimming losses following on hawkish ECB comments and higher German CPI.
• In the UK higher unemployment claims and easing wage pressures are weighing on the Pound.
• EUR/GBP bullish momentum will increase above 0.8615.

The Euro is trimming some losses against the Pound Sterling. The pair is testing the resistance area right above 0.8600, favoured by hawkish ECB speak and higher German CPI while the soft UK employment data weighs on the GBP.

The Bank of France Governor, Francois Villeroy de Galhau has reiterated Bundesbank Nagel’s comment from Monday, affirming that it is still too early to consider rate cuts. The German CPI, which has accelerated to a 3.7% yearly reading in December, from 3.2% in the previous month, has endorsed those comments.

In the UK, the Unemployment level remained steady at 4.2% In the three months to November. The higher unemployment claims and the slower wage growth, however, have punished the Pound.

The technical picture remains negative, although bearish pressure has faded. A clear move above 0.8616 would increase and shift the focus towards the 0/8640/50 area. Support levels are 0.8580 and 0.8550.

Technical levels to watch