EURGBP Bearish Bias Reaffirmed after UK CPI but BoE Looms
The Bank of England lowered rates last month, for the first time in four years, joining major peers in their shift to less restrictive monetary settings. However, officials adopted a cautious and non-committal approach on further easing, as they remain wary of inflation which they expect to rise further this year. Today’s inflation report will likely strengthen the BoE’s apprehension, as CPI stayed above the 2% target, while core accelerated to 3.6% y/y in August.
EURGPB faces pushback as a result, at the critical resistance cluster provided by the EMA200 (black line) and the 23.6% Fibonacci of the August fall. Bearish bias is intact below that level, sustaining risk for further losses towards and beyond 0.8381. The monetary policy differential is unfavorable for the pair, as the ECB has already slashed rates twice this year and at least one more cut is expected this year.
The Bank of England will have a hard time moving again on Wednesday, but pressure for faster easing pace is likely to increase. Wage growth moderated substantially and this can allow greater tolerance for slower return of inflation to target, while the economy remains fragile, despite exiting its brief recession.
EUR/GBP has contained its fall in recent weeks and a break above the aforementioned resistance cluster would pause the bearish bias and provide the launching pad for taking out the 38.2% Fibonacci. Greater recovery however towards the 61.8% levels looks hard under current policy dynamics.
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EURGPB faces pushback as a result, at the critical resistance cluster provided by the EMA200 (black line) and the 23.6% Fibonacci of the August fall. Bearish bias is intact below that level, sustaining risk for further losses towards and beyond 0.8381. The monetary policy differential is unfavorable for the pair, as the ECB has already slashed rates twice this year and at least one more cut is expected this year.
The Bank of England will have a hard time moving again on Wednesday, but pressure for faster easing pace is likely to increase. Wage growth moderated substantially and this can allow greater tolerance for slower return of inflation to target, while the economy remains fragile, despite exiting its brief recession.
EUR/GBP has contained its fall in recent weeks and a break above the aforementioned resistance cluster would pause the bearish bias and provide the launching pad for taking out the 38.2% Fibonacci. Greater recovery however towards the 61.8% levels looks hard under current policy dynamics.
Stratos Markets Limited (fxcm.com/uk):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Europe Ltd (trading as “FXCM” or “FXCM EU”) (fxcm.com/eu):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Trading Pty. Limited (fxcm.com/au):
Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763). Please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at fxcm.com/au
Stratos Global LLC (fxcm.com/markets):
Losses can exceed deposits.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this video are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed via FXCM`s website:
Stratos Markets Limited clients please see: fxcm.com/uk/market-commentary/
Stratos Europe Ltd clients please see: fxcm.com/eu/market-commentary/
Stratos Trading Pty. Limited clients please see: fxcm.com/au/market-commentary/
Stratos Global LLC clients please see: fxcm.com/markets/market-commentary/
Past Performance is not an indicator of future results.
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