EUR/GBP Forecast: Euro Pinned at 0.8549 Into the UK CPI Print
- The euro trades at 0.85491 against sterling, unchanged on the day and inside a range barely forty pips wide.
- Euro area inflation rose to 2.9% in July while UK inflation sat at 2.6% in June, narrowing the gap that has favoured sterling all year.
- The 0.8560 shelf is the level that decides whether this consolidation resolves higher or breaks down.
Fundamental Analysis: EUR/GBP
Euro area annual inflation picked up to 2.9% in the July flash estimate published on 31 July, from 2.8% in June. The European Central Bank has its main refinancing rate at 2.40% and the deposit facility at 2.25%, and a reading drifting back above target removes what little pressure there was for further easing. The bar for another cut this year is now high.
On the other side, the Bank of England held at 3.75% on 30 July with three of nine members voting for a hike, and UK CPI was 2.6% in June. Sterling has spent the year carrying a rate advantage of 135 basis points over the euro, and the July UK inflation release on 19 August will determine whether that advantage is defended or begins to erode.
That leaves the cross with two live inputs pointing in opposite directions and neither yet decisive. Euro area inflation is drifting up, which argues for a firmer euro; UK policy remains the more restrictive of the two, which argues for firmer sterling. Until Wednesday's print resolves the second of those, the pair has no reason to leave its range.
Technical Analysis: EUR/GBP
The 4-hour chart shows the euro climbing from 0.8532 on 23 July to 0.8582 by 5 August, then giving all of it back in a two-day break on 10 and 11 August that took price to 0.8538. Since then the cross has traded a narrow band between roughly 0.8540 and 0.8557, with all four moving averages clustered overhead at 0.8560, 0.8552, 0.8550 and 0.8548 and price hugging the lowest of them.
Resistance is the 0.8560 average shelf, and then the 0.8582 August high. Support is 0.8540, the floor of the current band, with the 0.8532 late-July low beneath it. A daily close below 0.8532 would take out the entire structure built since late July and invalidate the consolidation read.
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