EUR/GBP snaps two-day uptrend ahead of Eurozone CPI

EUR/GBP begins June on a back foot as mixed catalysts and cautious sentiment ahead of the key data probe buyers after two-day upside. That said, the quote stands on the slippery ground near 0.8595, down 0.08% intraday amid Tuesday’s Asian session.

An uptick in the US 10-year Treasury yields to 1.61% could be traced as the frontline catalysts to help the US dollar bounce and weigh on the European currency (EUR). Also acting as the key factor is the market’s fears of strong EU inflation pushing the ECB to ease their rejection of tapering. Behind the moves could be the recent uptick in the German harmonized Index of Consumer Prices (HICP), the European Central Bank's preferred gauge of inflation, which rose to 2.4% annually and fell short of the market expectation of 2.5%.

Elsewhere, EUR/GBP sellers also cheer the return of full markets after Monday’s holiday in the US and the UK. That said, cautious sentiment ahead of the key Brexit talks next week and comparatively stronger virus-led optimism in London than Brussels act as additional catalysts for the pair’s latest weakness.

It’s worth noting that the contrasting play between the ECB and the BOE also drags the EUR/GBP prices as the British central bank has already favored tapering but policymakers in the bloc are still hesitant to accept reflation fears.

Hence, today’s preliminary reading of the Eurozone Consumer Price Index (CPI) data for May, expected to inch closer towards the 2.0% target versus 1.6% forecast, will be the key. Also important is the UK Manufacturing PMI for the stated month, likely confirming 66.1 initial forecasts.

Technical analysis

Failures to extend Friday’s recovery moves beyond the 10-day SMA level of 0.8614 keep EUR/GBP sellers hopeful.