EUR/GBP gains momentum as EU inflation data tampers ECB dovish expectations

Source Fxstreet
May 31, 2024 12:32
  • EUR/GBP rose sharply on Friday at 0.8531, notching a 0.26% gain.
  • Inflation data from the Eurozone, both headline and core HICP, exceeded the forecasts.
  • A cut in June by the ECB seems already priced in, but hot inflation figures may impact the timing of the rest of the easing cycle.

The EUR/GBP pair is riding high on robust European Union (EU) inflation data, surpassing expectations and shifting market expectations away from the dovish view of the European Central Bank (ECB).

The inflation trend witnessed in the Eurozone is a critical driver currently dominating the FX markets, overriding the ECB's dovish undertone. Spain's HICP data further influenced the pair's gains, coming in a tick higher than expected at 3.8% YoY against the previous 3.4%. Germany's Harmonised rate, too, picked up to 2.8% YoY, outpacing April's 2.4%. Similarly, the EU’s block figures rose by 2.6% YoY for headline and 2.9% for the core measure both beating expectations.

These figures indicate unanticipated inflation pressures, potentially nudging the ECB to reconsider its dovish stance. In that sense, the talk in the next sessions will be on how aggressively the bank will take the easing cycle following a 25 bps cut already priced in June.

EUR/GBP technical analysis

In the daily analysis, the Relative Strength Index (RSI) hovers in negative territory, signifying considerable seller dominance over the past sessions. Furthermore, despite a slight rise from its near-oversold condition, the RSI still lingers below 50, indicating a possible continuing downward trend. The Moving Average Convergence Divergence (MACD) histogram reveals a series of decreasing red bars, implying a consistent negative momentum and validating the current bearish market sentiment.

EUR/GBP daily chart

Adding to this bearish sentiment, the EUR/GBP is trading beneath three crucial Simple Moving Average (SMA) of the 20, 100, and 200-day. This positioning typically signals a bearish market condition, with further downward trends and potential additional price drops on the horizon.

 

EUR/GBP

Overview
Today last price 0.8537
Today Daily Change 0.0029
Today Daily Change % 0.34
Today daily open 0.8508
 
Trends
Daily SMA20 0.8555
Daily SMA50 0.8562
Daily SMA100 0.8556
Daily SMA200 0.8602
 
Levels
Previous Daily High 0.8517
Previous Daily Low 0.8502
Previous Weekly High 0.8568
Previous Weekly Low 0.85
Previous Monthly High 0.8645
Previous Monthly Low 0.8521
Daily Fibonacci 38.2% 0.8511
Daily Fibonacci 61.8% 0.8508
Daily Pivot Point S1 0.8501
Daily Pivot Point S2 0.8494
Daily Pivot Point S3 0.8485
Daily Pivot Point R1 0.8516
Daily Pivot Point R2 0.8524
Daily Pivot Point R3 0.8531

 

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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