- The two-day rally stalled in Asia at 0.8880.
- Focus on UK CPI
The two-day rally or the "v" shaped recovery in EUR/GBP from Thursday's low of 0.8732 seems to have come to halt below the 0.89 handle in the last 12 hours.
As of writing, the currency pair is flatlined at 0.8880 - up 2.2 percent from the Jan. 25 low of 0.8687.
The UK data due at 09:30 GMT today is expected to show the cost of living as represented by the consumer price index (CPI) fell 0.6 percent on month in January vs. 0.4 percent rise seen in December. The core inflation is seen rising 2.6 percent year-on-year vs. 2.5 percent in December. Mario Blascak, Chief European Analyst at FXStreet, says, "such divergence of the headline and core inflation is negative because it indicates that the headline CPI deceleration is driven only by seasonal and temporary factors while demand-driven inflation is on the rise."
So an uptick in the core CPI alone could bode well for Sterling, thus pushing EUR/GBP lower. On the other hand, a downside surprise in core inflation could push EUR/GBP well above the recent high of 0.8911.
EUR/GBP Technical Levels
A break above 0.8892 (Feb. 12 high) would open doors for 0.8911 (Feb. 6 high) and 0.8929 (Jan. 12 high). On the other hand, a daily close below 0.8865 (200-day MA) could yield re-test of 50-day MA seen at 0.8829 and 0.88 (psychological level).
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