EUR/GBP pushes toward two-week high amid cooling UK services inflation

• EUR/GBP extends its advance near the 0.8570 zone at the end of the European session.
• UK and euro-area headline inflation both printed 2.9% for July, but a slowdown in UK producer prices trimmed the Sterling bid.
• July FOMC Minutes are due this afternoon, with global bond yields easing back from multi-decade highs.

EUR/GBP trades on the front foot on Wednesday, pushing up to the vicinity of a two-week high near the 0.8570 region as the Euro holds firm against a softer British Pound (GBP). The pair has cleared its recent range after a run of green candles on the 4-hour chart.

The move followed July inflation reports from both economies. UK headline Consumer Price Index (CPI) rose 2.9% over the year, a four-month high and up from 2.6% in June, matching forecasts. Core CPI held at 2.6%, a touch hotter than the 2.5% expected. But core services inflation, the gauge the Bank of England (BoE) watches most closely, eased to 3.4% from 3.6%, and that cooling limited Sterling's lift after the release.

On the other side of the pair, the final euro-area reading confirmed headline inflation at 2.9% for July, unchanged from June and still well above the European Central Bank (ECB) target. With price pressure firm and the print in line, the Euro kept its footing.

The backdrop remains a global bond-market squeeze. Longer-dated yields have run to multi-year highs this week on inflation and fiscal worries, with German and UK long-end yields both elevated. US Treasury yields pulled back on Wednesday from those highs as traders square up ahead of the Federal Reserve's (Fed) Federal Open Market Committee (FOMC) Minutes.

Investors will look for detail on the split at that meeting, where pre-release reporting flagged three dissenters who wanted a rate hike. The tone of the Minutes will steer broader risk sentiment into the European close.

Short-term technical analysis:

On the 4-hour chart, EUR/GBP trades at 0.8572, holding a modest bullish bias as it remains above both the 20-period Simple Moving Average (SMA) at 0.8552 and the 100-period SMA at 0.8559. The cluster of nearby horizontal levels at 0.8561 and 0.8563 reinforces this underlying demand zone, while the Relative Strength Index (RSI) near 68 suggests firm upward momentum that is edging toward overbought territory, hinting at the risk of a short-term pause if buyers hesitate near the current highs.

On the topside, immediate resistance is defined by the recent horizontal barrier at 0.8573, and a sustained break above this level would open the way for further gains in the near term. On the downside, initial support is seen at the 0.8563/0.8561 band, ahead of the 100-period SMA at 0.8559 and the lower horizontal and moving average floors at 0.8558 and 0.8552, where dip-buying interest is likely to emerge while the pair maintains its current constructive structure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)