EUR/GBP targets 0.8800 on poor UK CPI

  • The cross moves higher following UK data.
  • UK inflation figures disappointed in January.
  • PM Theresa May expected to resume Brexit discussions today.

The Sterling is now giving away part of its earlier gains and is lifting EUR/GBP to the vicinity of the 0.8800 handle, or 4-day highs.

EUR/GBP higher post-data, looks to Brexit talks

The European cross is extending the weekly rebound following a bout of GBP-selling in the wake of disappointing UK inflation figures for the month of January.

In fact, measured by the CPI, consumer prices rose at an annualized 1.8% during last month (from 2.1%) and contracted 0.8% inter-month. In addition, Core CPI advanced 1.9% from a year earlier.

Back to Brexit, PM Theresa May is expected to face the weekly discussions at the House of Commons later today. However, there are no significant developments as of late regarding the UK-EU negotiations.

What to look for around GBP

The British Pound is expected to remain under increasing pressure as we get closer to the March 29 deadline and there is still not a hint of a solution to the EU-UK divorce, where the Irish backstop stays in centre stage and a ‘hard Brexit’ scenario is not totally ruled out. Extra weakness hitting the Sterling also comes from deteriorated fundamentals in the UK, the persistent downtrend in inflation as well as lower growth forecasts, as per the latest BoE event.

EUR/GBP key levels

The cross is now gaining 0.02% at 0.8785 facing the next hurdle at 0.8821 (high Feb.5) followed by 0.8860 (200-day SMA) and finally 0.8886 (55-day SMA). On the flip side, a break below 0.8755 (21-day SMA) would open the door to 0.8728 (low Feb.7) and then 0.8655 (monthly low Nov.13 2018).

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