- EUR/GBP takes offers to refresh intraday low, pares the biggest daily gains in three weeks.
- UK CPI rose to 10.4% in February versus 0.6% expected and -0.6% prior.
- Former UK PM Johnson joins ERG, DUP to renew Brexit woes.
- Banking crisis may probe ECB’s Lagarde to soften hawkish bias.
EUR/GBP renews intraday low to 0.8781 as upbeat UK inflation data bolsters hawkish hopes from the Bank of England (BoE) on early Wednesday. That said, the cross-currency pair’s rallied the most three weeks the previous day as pessimism surrounding the Brexit deal joined hawkish comments from the European Central Bank (ECB) officials.
UK’s headline inflation data, namely the Consumer Price Index (CPI) rose to 10.4% YoY in February versus 9.8% expected and 10.1% previous readings while the Core CPI rose to 6.2% compared to 5.8% market forecasts and previous readings. Given the improvement in the British inflation figures, the Bank of England (BoE) may be able to perform well in its likely last hawkish dance on Thursday, which in turn helps the EUR/GBP bears.
Also read: Breaking: UK annualized CPI inflation jumps to 10.4% in February vs. 9.8% expected
It’s worth noting, however, that the pessimism surrounding UK Prime Minister (PM) Rishi Sunak’s Brexit deal among some fellow Conservatives and the European Research Group (ERG), as well as the Democratic Unionist party (DUP), put a floor under the EUR/GBP prices. As per the latest headlines from The Telegraph, “Boris Johnson will vote against Rishi Sunak’s Brexit deal on Wednesday in a major boost for Tory rebels who warn it is not the right solution for Northern Ireland.”
Elsewhere, ECB policymaker Martins Kazaks said on Tuesday, “Uncertainty in the financial markets is high, but European banks are well capitalized.” The policymaker also added that there is no reason to compare the situation with 2008. Additionally, the ECB board member and Spanish central bank head Pablo Hernandez de Cos said on Tuesday, “market expectations of a 3.25% rate peak cannot be validated.” Recently, ECB policymaker and Bundesbank Chief Joachim Nagel said, “There’s still some way to go, but we are approaching restrictive territory.”
Having witnessed the initial reaction to the UK’s inflation data, EUR/GBP pair traders should pay attention to the Brexit developments in the House of Commons, as well as a speech from ECB President Christine Lagarde for fresh impulse. Above all, Thursday’s Bank of England (BoE) announcements are crucial for the cross-currency pair traders to watch as the British central bank appears running out of steam to back the hawkish moves.
Also read: BoE Interest Rate Decision Preview: Preparing the ground for a rate hike pause in May
Technical analysis
Failure to cross the convergence of 21-DMA and 50-DMA, around 0.8820 by the press time, keeps EUR/GBP bears hopeful.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD remains depressed near 1.0700 ahead of Lagarde, US data
EUR/USD is trading close to 1.0700, on the defensive in the European session. The US Dollar is extending post-US NFP gains amid cautious optimism, as investors assess the Fed rates outlook. Eurozone Sentix data slumps to -17.1 in June. Lagarde, US data awaited.
GBP/USD drops below 1.2400 amid firmer US Dollar
GBP/USD is falling below 1.2400 amid a notable US Dollar demand, dragging the major lower for the second successive day on Monday. Markets repricing of the Fed interest rates outlook push the US Treasury bond yields higher, in turn, the US Dollar. US ISM Services PMI next of note.
Gold finds short-term cushion above $1,940, more downside looks solid
Gold price has found a short-term cushion near $1,943.00, however, more downside seems favored. Gold price witnessed an intense sell-off after a mean-reversion move to near the 200-period EMA at $1,977.32.
Pro-XRP attorney says Ripple has 25% chance of winning against SEC, Judge could announce verdict by September
Ripple has a 25% chance of winning its legal battle against the US SEC, according to pro-XRP attorney John Deaton. Over the weekend, Deaton shared his opinion on Ripple’s likelihood of both an outright win and a partial victory.
Services PMIs the next focus after last week’s bumper US jobs report
While US markets finished the week on a high, after another bumper jobs report and a positive week across the board, markets in Europe, while finishing the week on a high, struggled to match the exuberance of investors on the other side of the Atlantic.