EUR/GBP finds support on less dovish ecb, persistent inflation
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The EUR/GBP cross trades near 0.8430, holding steady despite slight downside pressures. Eurozone inflation data, which showed higher-than-expected figures, has supported the Euro by prompting the European Central Bank (ECB) to maintain a cautious stance on rate cuts. Meanwhile, the UK’s inflation outlook for 2024 has been revised upward, dampening rate-cut expectations for the Bank of England (BoE).
ECB’s Cautious Approach in Focus
The EUR/GBP exchange rate has remained relatively stable after two days of gains, even as it hovers just below the 0.8450 mark. Data showing rising inflation in the Eurozone has spurred expectations that the ECB may continue with a cautious policy approach, limiting aggressive rate cuts. October’s preliminary Harmonized Index of Consumer Prices (HICP) revealed a year-over-year increase to 2.0%, up from 1.7%, and core inflation remained steady at 2.7%—a figure largely driven by wage growth.
Furthermore, the Eurozone’s Q3 economic growth figures came in above expectations, posting a quarter-over-quarter expansion of 0.4%. This growth, coupled with stubbornly high inflation, supports the ECB’s commitment to a “meeting-by-meeting” strategy, underscoring its data-dependent approach in managing inflationary pressures.
UK’s Revised Inflation Forecast Adds Complexity for BoE Policy
In the UK, inflation concerns have also resurfaced. The Office for Business Responsibility (OBR) recently adjusted its 2024 inflation forecast upwards to 2.5% from the previous estimate of 2.2%. This increase follows the UK Labour government’s announcement of £40 billion in new taxes, part of its strategy to address public finance gaps. The additional fiscal burden is expected to weigh on consumer spending, possibly limiting economic momentum. However, rising inflation could lead the BoE to delay further rate cuts, adding another layer of support for the Pound.
Technical Analysis: EUR/GBP Looks for a Break Above 0.8450
Resistance: Immediate resistance lies at 0.8450. A breakout above this level could see EUR/GBP testing higher levels around 0.8480, strengthening its upward trajectory.
Support: Downside support is anticipated near the 0.8400 mark. Should the pair dip below this, further support could emerge around 0.8350.
With both the ECB and BoE likely to approach future rate decisions conservatively, EUR/GBP could experience range-bound movements, though with limited downside as inflation continues to shape market expectations in the Eurozone and the UK.
ECB’s Cautious Approach in Focus
The EUR/GBP exchange rate has remained relatively stable after two days of gains, even as it hovers just below the 0.8450 mark. Data showing rising inflation in the Eurozone has spurred expectations that the ECB may continue with a cautious policy approach, limiting aggressive rate cuts. October’s preliminary Harmonized Index of Consumer Prices (HICP) revealed a year-over-year increase to 2.0%, up from 1.7%, and core inflation remained steady at 2.7%—a figure largely driven by wage growth.
Furthermore, the Eurozone’s Q3 economic growth figures came in above expectations, posting a quarter-over-quarter expansion of 0.4%. This growth, coupled with stubbornly high inflation, supports the ECB’s commitment to a “meeting-by-meeting” strategy, underscoring its data-dependent approach in managing inflationary pressures.
UK’s Revised Inflation Forecast Adds Complexity for BoE Policy
In the UK, inflation concerns have also resurfaced. The Office for Business Responsibility (OBR) recently adjusted its 2024 inflation forecast upwards to 2.5% from the previous estimate of 2.2%. This increase follows the UK Labour government’s announcement of £40 billion in new taxes, part of its strategy to address public finance gaps. The additional fiscal burden is expected to weigh on consumer spending, possibly limiting economic momentum. However, rising inflation could lead the BoE to delay further rate cuts, adding another layer of support for the Pound.
Technical Analysis: EUR/GBP Looks for a Break Above 0.8450
Resistance: Immediate resistance lies at 0.8450. A breakout above this level could see EUR/GBP testing higher levels around 0.8480, strengthening its upward trajectory.
Support: Downside support is anticipated near the 0.8400 mark. Should the pair dip below this, further support could emerge around 0.8350.
With both the ECB and BoE likely to approach future rate decisions conservatively, EUR/GBP could experience range-bound movements, though with limited downside as inflation continues to shape market expectations in the Eurozone and the UK.