EUR/GBP Declines as Pound Gains Strength Ahead of Key Economic Reports
Market Overview
The euro weakened against the pound on Monday as traders positioned themselves ahead of key UK economic data. The Bank of England (BoE) recently cut interest rates but maintained a cautious stance on inflationary pressures, keeping the pound relatively supported. This week’s economic releases, particularly UK wage growth, unemployment, and inflation data, will be crucial in determining the short-term direction for GBP.
Analysts expect Tuesday’s labour market report to show a modest increase in average earnings while the unemployment rate ticks up from 4.4% to 4.5%. On Wednesday, inflation data is forecast to reveal an acceleration in headline CPI from 2.5% to 2.8%, potentially influencing BoE policy expectations. Meanwhile, for the euro, France’s inflation figures and Germany’s ZEW economic sentiment index will play a key role in determining sentiment toward the single currency.
Technical Analysis
EUR/GBP has been trading within a consolidation range following a previous downward trend on the four-hour chart. Sellers are attempting to break the key support at 0.83155, which could extend the bearish momentum. A clear downside move below this level would expose further targets at 0.83092 and 0.83012. Sustained selling pressure could push the pair toward 0.82923 and 0.82780.
The moving averages are converging and aligning horizontally, indicating a market equilibrium. However, both RSI and MACD remain in negative territory, suggesting that bearish momentum is building, and a downside break remains likely.
Conversely, if buyers regain control, a reversal above 0.83244 could open the path toward 0.83387, potentially neutralizing the bearish scenario.
Key Technical Levels
- Resistance Levels: 0.83244, 0.83387
- Support Levels: 0.83155, 0.83092, 0.83012, 0.82923, 0.82780
Fundamental Drivers
UK Labour Market Data (Tuesday): Wage growth and unemployment figures could shape BoE policy expectations. A stronger-than-expected wage increase may support GBP, while rising unemployment might limit its gains.
UK Inflation Data (Wednesday): Higher-than-expected CPI could reinforce inflation concerns and limit further BoE rate cuts, strengthening GBP.
Eurozone Sentiment & Inflation Reports: France’s inflation data and Germany’s ZEW sentiment index could impact the euro’s trajectory. Stronger ZEW figures may limit EUR downside, while weak data could exacerbate the decline.
Conclusion
EUR/GBP remains under bearish pressure, with sellers targeting a break below 0.83155. A successful breakdown could accelerate losses toward 0.83012 and 0.82780. However, if support holds and sentiment shifts, a recovery toward 0.83244 and 0.83387 remains possible. UK employment and inflation data will be the primary catalysts for the next significant move in the pair.
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