EUR/GBP Forecast: 0.8578 Breaks Above the 0.8560 Band
- EUR/GBP trades at 0.8578, flat on the day after a sharp push through its moving-average cluster.
- Both blocs printed 2.9% inflation for July, but only one central bank has an active hawkish minority.
- 0.8590 is the ceiling that has held all month; 0.8560 is the floor that just became support.
Fundamental Analysis: EUR/GBP
The inflation reading is now identical on both sides of this cross. Eurostat confirmed euro area annual inflation at 2.9% for July in its 19 August release, up from 2.8%, and UK CPI also came in at 2.9% for July - a four-month high, driven by higher energy costs, with core at 2.6% and services still running at 3.6%.
What differs is the policy response. The Bank of England has Bank Rate at 3.75% and held there on 30 July by a 6-3 vote, with three members voting to raise. The ECB's deposit rate sits at 2.25% with no comparable dissent on the record. On paper that 150 basis point gap should keep sterling firm, and for most of the summer it has.
The interesting part is that the cross has pushed higher anyway. Sticky UK services inflation cuts both ways: it argues for tighter policy, but it also raises the question of whether the MPC's hawkish minority can deliver against a soft growth backdrop. Until that question is settled, the euro is finding it easier to hold ground here than the rate differential alone would suggest.
Technical Analysis: EUR/GBP
August has been a range. The high near 0.8590 was set in the first week, the low at 0.8535 came between 11 and 13 August, and price spent most of the month pinned beneath a moving-average cluster at 0.8554, 0.8556, 0.8560 and 0.8561. That changed in the last two sessions: a sharp rally took the cross through the whole cluster and up to 0.8586 before settling at 0.8578.
Resistance is the 0.8586 spike high, then the 0.8590 range ceiling and the round 0.8600 above it. Support is now the moving-average band at 0.8561-0.8554, which needs to hold to keep the breakout credible, with 0.8535 the August floor beneath. A four-hour close back under 0.8554 would mark the move as a false break.
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