EUR/GBP stuck in a tight range ahead of key data further in the week

EUR/GBP is trading in a tight range ahead of the key economic data further this week.
The ECB meeting on Thursday and the UK Gross Domestic Product on Friday should unlock the status quo.

Flavio Tosti Independent Analyst

The EUR/GBP is trading at around 0.8746 down 0.13% on Tuesday's trading.

The EUR/GBP is trading in a tight range since Friday. The cross got a boost last week on the back of British pound weakness that was particularly pronounced against the US Dollar.

Market participants are now waiting for key macroeconomic data before committing to either side of the trade. The key event of the week in the Eurozone will be on Thursday with the ECB Governing Council meeting with investors expecting the ECB to remain rather cautious advocating prudence and patience. The recent weakness in inflation and manufacturing and services activity data (PMIs) is also attributed to the euro currency strength itself. The stronger the currency the less appealing exports become. At the previous ECB meeting in March, the central bank made a small hawkish step by dropping the easing bias, meaning that they would not increase stimulus if needed.

On the other hand, the key event in the UK will be on Friday with the Gross Domestic Product (GDP) expected to come in unchanged at 0.4% Q/Q for the first quarter of this year. A deviation to the downside could discourage GBP bulls of a May rate hike and exacerbate an already fragile sentiment on Sterling.

Looking back, the GBP as seen a strong wave of selling as average earnings (wages), inflation and retail sales disappointed the market last week. What added fueled to the fire were the comments from Bank of England’s Governor Mark Carney who said that the rate hike in May could be delayed because of Brexit-related issues and Michael Saunders, who represents the hawkish side of the Monetary Policy Committee of the Bank of England, who made rather dovish comments last Friday saying: “the UK rates probably need to move over time to something more neutral, but not too quickly.”

EUR/GBP daily chart

The trend is neutral. Support is seen at 0.8700 key level and at 0.8620 cyclical low while resistance is priced in at 0.8729 cyclical high and 0.8900 figure.

Author

Flavio Tosti

Independent Analyst

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