CFD Trading Rate Euro vs Great Britain Pound (EURGBP)

As a result of the UK’s Brexit referendum in June 2016, the trading range for EUR/GBP swiftly adjusted from trading mostly below the 0.80 level in H1 that year to an average of around 0.8590 in H2 2016, Rabobank’s FX analyst Jane Foley notes.

EUR/GBP seems to be eyeing the downside

“Since July 2016 the average trading level for EUR/GBP has been 0.8690. However, having started 2023 close to that average level, the currency pair has subsequently been on a slow grind lower. Last month EUR/GBP dipped close to the 0.8260 level and is currently trading only modestly above this low.”

“This raises the question as to whether GBP can achieve pre-Brexit referendum levels vs. the EUR in the foreseeable future. Our 12-month forecast for EUR/GBP is 0.8150. This falls short of a move back to pre-referendum levels. That said, it would take the currency pair below the 2022 low to levels last seen In June 2016, just after the referendum result was published.”

“In our view, downside risk to this forecast is more likely to come from a weaker than expected EUR rather than a more emboldened pound.”

• EUR/GBP loses ground due to the reduced likelihood of another BoE’s interest rate cut this year.
• BoE Lombardelli requires clearer signs of easing inflationary pressures before considering further rate cuts.
• German Retail Sales rose by 1.0% YoY in October and fell drastically short of the expected 3.2% and previous 3.8% readings.

EUR/GBP extends its losses for the fourth consecutive session, trading around 0.8310 during the Asian hours on Friday. The Pound Sterling (GBP) appreciates as traders have been scaling back their bets for another interest rate cut by the Bank of England (BoE) this year after data released last week showed that the underlying price growth in the UK gathered speed in October.

On Monday, during a speech at King’s Business School, BoE Deputy Governor Clare Lombardelli stressed the need for clearer signs of easing inflationary pressures before considering further rate cuts. Lombardelli also warned of the risks associated with inflation staying above the BoE’s target. She highlighted concerns about wage growth stabilizing at 3.5%-4.0% and the Consumer Price Index (CPI) lingering around 3% instead of the 2% target, which could present significant policy challenges.

Economic data releases remain sparse for the United Kingdom (UK), with a similarly light calendar expected in the coming week. The Bank of England’s (BoE) latest Financial Stability Report will drop on markets early during Friday’s upcoming US market session. The release is overwhelmingly unlikely to drive much momentum in Cable markets.

European Central Bank (ECB) policymakers have voiced concerns over the Eurozone's slowing economic growth, heightening expectations of a rate cut in December. However, uncertainty persists regarding the size of the potential reduction, as the market remains divided.

Traders are now closely watching Friday’s release of the Eurozone Harmonized Index of Consumer Prices (HICP) data. Core HICP inflation is projected to edge up to 2.8% YoY in November, compared to 2.7% in October. This uptick could complicate matters for ECB officials, many of whom have recently sought to reassure investors of more rate cuts despite rising inflationary pressures.

• EUR/GBP flat lines near 0.8330 in Thursday’s early European session. 
• BoE policymakers support a gradual policy-easing approach.
• The preliminary German CPI inflation data for November will be in the spotlight on Thursday.

The EUR/GBP cross holds steady around 0.8330 during the early European session on Thursday. The cautious stance and reduced bets of the Bank of England's (BoE) cutting interest rates in December provide some support to the Pound Sterling (GBP) and drag the cross lower. 

The BoE officials remain cautious on rate reductions. The BoE Deputy Governor Clare Lombardelli supported the case of BoE pauses easing at the December meeting, citing that “I do worry [that] we still have services inflation in this country consistently at levels above their pre-Covid average, well above rates that are consistent with the [2%] inflation target.” Lombardelli further stated that she needs to see more evidence of cooling price pressures before she backs another interest rate cut. 

The European Central Bank (ECB) policymakers express concerns about the Eurozone's current and future economic growth. The rising speculation that the ECB will have to implement aggressive interest rate cuts to prop up the faltering regional economy could weigh on the Euro (EUR) against the GBP in the near term.

Traders brace for the preliminary German Consumer Price Index (CPI) for November, which is due on Thursday. The annual CPI inflation is expected to rise to 2.2% in November from 2.0% in the previous reading. If the report shows a hotter-than-expected outcome, this could underpin the shared currency. 

• EUR/GBP remains subdued as Pound Sterling receives support from the hawkish mood surrounding the BoE policy decision in December.
• BoE Deputy Governor Lombardelli requires more evidence of easing price pressures before supporting another rate cut.
• The Euro struggles as the ECB could deliver a rate cut in December amid growing concerns about Eurozone's economic outlook.

EUR/GBP extends its losses for the second successive session, trading around 0.8330 during the early European hours on Wednesday. This downside of the EUR/GBP cross could be attributed to improved Pound Sterling (GBP) amid reduced expectations of the Bank of England (BoE) cutting interest rates in December.

Most BoE policymakers favor a gradual approach to easing monetary policy. BoE Deputy Governor Clare Lombardelli stated on Tuesday that she would require additional evidence of easing price pressures before supporting another interest rate cut. US trade tariffs could threaten economic growth, though it remains too early to assess the full impact of the proposed measures, Lombardelli added.

In contrast, Eurozone markets have fully priced in a 25-basis-point rate cut by the European Central Bank (ECB) in December, with the probability of a larger 50 bps cut rising to 58%. This reflects growing market concerns about the region's economic prospects. 

Meanwhile, US President-elect Donald Trump's renewed tariff threats against China, Mexico, and Canada have further dampened market sentiment, adding downward pressure on European economies and weighing on the risk-sensitive Euro.

Traders are now focused on the upcoming release of the Eurozone Harmonized Index of Consumer Prices (HICP) inflation data on Friday. Preliminary inflation and core inflation figures for November are expected to show annualized increases, potentially raising concerns for investors. Moreover, Bank of England’s Financial Stability Report will also be eyed.

• EUR/GBP might be unfolding a bullish leg within a sideways range.  
• The MACD has crossed its signal line and is above zero, – a bullish sign. 

EUR/GBP is clawing its way back up within its multi-week range. It is possible that this may be the start of an up leg within the range towards the ceiling at around 0.8450.

The pair is probably in a sideways trend on a short-term basis and given the principle of technical analysis that prices are more likely to extend in the direction in which they are trending it will probably continue oscillating in its sideways trend until it makes a decisive breakout either higher or lower. It is overall at two and a half year lows. 

EUR/GBP 4-hour Chart 

EUR/GBP made a false break lower on November 8 and then, a second time, on an intraday basis, on November 22. On both occasions it failed to follow-through lower, however, and instead just recovered back inside the range. 

Because it is in a sideways trend the odds favor a continuation sideways, which suggests the possibility of a recovery from the current level up to ceiling. 

A break above 0.8375 would probably lead to a continuation higher to a target at 0.8440, just below the ceiling. 

The Moving Average Convergence Divergence (MACD) momentum indicator, which is a reliablñe indicator in sideways markets has crossed above its red signal line and is also now above the zero line suggesting a bullish short-term bias.

• EUR/GBP attempts to extend gains after recovering daily losses on Tuesday.
• The risk-sensitive Euro could struggle as European economies may face challenges amid President-elect Donald Trump's tariff threat.
• The Pound Sterling may appreciate as BoE could potentially keep interest rates steady at 4.75% in December.

EUR/GBP remains steady after recovering daily losses, trading near 0.8350 during early European hours on Tuesday. However, downside risks persist for the EUR/GBP cross as the Euro faces pressure from growing concerns about the Eurozone's economic outlook. These concerns are fueled by uncertainties surrounding political instability in Germany and France.

The Euro, being sensitive to risk, could face additional downward pressure as European economies may struggle amid worsening global sentiment. This follows US President-elect Donald Trump's pledge to impose higher tariffs on China, Mexico, and Canada, intensifying fears of escalating global trade tensions.

Markets have fully priced in a 25 basis point (bps) rate cut by the European Central Bank (ECB) in December, while the likelihood of a larger 50 bps cut has climbed to 58%, highlighting growing market pessimism about the Eurozone's economic prospects.

In contrast, market sentiment has shifted toward the Bank of England (BoE) potentially slowing the pace of policy easing and keeping interest rates steady at 4.75% during its December meeting. This is attributed to the annual inflation rate surging to 2.3% in October, the highest level in six months, up from 1.7% in September. Such a decision would strengthen the Pound Sterling (GBP) and apply further downward pressure on the EUR/GBP cross.

However, the GBP faced challenges last week due to weak economic data. UK Retail Sales saw a sharper-than-expected decline in October, while the flash S&P Global/CIPS Composite Purchasing Managers' Index (PMI) for November dropped below the 50.0 mark for the first time since October 2023, signaling a contraction in economic activity.

• EUR/GBP rallies back up to the 50-day SMA in the mid 0.8300s. 
• The Pound is depreciating on doubts about the robustness of the UK economy. 
• The Euro itself has problems, however, after another poor set of poor figures from Germany.  

EUR/GBP trades back up to the level of the 50-day Simple Moving Average (SMA) at around 0.8350 on Monday, but more as a result of Pound Sterling (GBP) weakness than Euro strength. 

The pair is safely back inside its medium-term range between roughly 0.8300 and 0.8450 as downside risks pressure both currencies lower, resulting in a lack of overall volatility and a range-bound market structure. That said, the pair is at over two-year lows, suggesting the possibility the Euro may be under valued and, perhaps, due a bounce. 

The German IFO Business Climate survey out on Monday, however, was not going to provide a catalyst for such a rebound. Based on over 9,000 responses in key sectors such as manufacturing, services, construction and trade, it showed a continuation of the theme of the German economy being stuck in a phase of decline. 

The IFO Current Assessment index fell to 84.3 in November from 85.7 in October and below the 85.4 forecast. It was a similar story with the Business Climate index which also fell from the previous month and fell below expectations. The Expectations index, meanwhile, came out at 87.2, above the 87.0 forecast but below the 87.3 previous.  Overall the data painted a negative picture of Europe’s largest economy. 

The IFO President Clemens Fuest noted that “The German economy is floundering.  Companies were somewhat skeptical again about the coming months.”  

The data follows weak Purchasing Manager Index (PMI) survey data for both the Eurozone and Germany on Friday, which showed the German composite PMI plunging to a nine-month low of 47.3 in October.  

“Germany remains the weak link in the Eurozone,” noted Dr. Win Thin, Global Head of Markets Strategy at Brown Brothers Harriman (BBH) in a note on the data releases. Given Germany’s importance as the “engine room” of the Eurozone economy, the comment is concerning.  

The Single Currency is still seeing gains against the Pound on Monday, however. This unintuitive reaction might be explained by the fact that Sterling is the weaker of the two but neither is the Euro particularly strong. 

GBP’s decline could be due to the string of poor data releases out of the UK recently. These have led investors to reappraise the future path of interest rates in the UK. This is key for Sterling since higher interest rates attract more foreign capital inflows, supporting the currency, whilst lower rates do the opposite and weaken GBP. 

Previously the perception had been that in the UK interest rates would remain at a relatively high 4.75% whilst in many other developed economies they would start to slide rapidly. This was mainly because of the UK economy’s high wages, high services sector inflation, robust labor market and relatively positive outlook for growth. 

The release of UK unemployment data for September, which showed the Unemployment Rate surprising to the upside at 4.3% from 4.0% previously, suggested the true picture might be less flattering. 

However, it was the release of preliminary UK PMI data for November, on Friday, which really began sowing seeds of doubt. The UK Composite PMI came out much lower than expected, and fell shockingly into contraction territory below 50. 

This poor PMI data resulted in market-based projections of the low point for UK interest rates to be revised down from 4.00% to 3.75%. 

“Looking at the November composite PMIs, Australia fell below 50 to 49.4, Japan remained below 50 but improved slightly to 49.8, and the Eurozone fell below 50 to 48.1.  However, the biggest surprise came from the U.K. as its composite plunged to 49.9 and joined the ranks of the sub-50,” says BBH’s Thin. 

That said, despite the weak data and the fact that swaps markets are pricing in a lower terminal interest rate, Bank of England (BoE) officials – who are tasked with adjusting interest rates –  do not seem to have radically changed their stance. 

It is possible that more poor data is required before they are ready to reassess their “gradualist” position. This was summed up by comments from the Deputy Governor of the BoE Clare Lombardelli on Monday, who said, “We should not focus too much on one set of data (regarding last week's weak PMI data).” 

Rather, “We remain focused more on services prices and wages…(..)..The labor market is still relatively tight,” and that “I view the probabilities of downside and upside risks to inflation as broadly balanced. But at this point I am more worried about the possible consequences if the upside materializes, as this could require a more costly monetary policy response.” 

• EUR/GBP drifts higher to around 0.8320 in Monday’s early European session. 
• The weaker-than-expected Eurozone PMI triggers ECB rate-cut bets. 
• The downbeat UK Retail Sales and flash PMI weigh on the GBP, but the cautious stance from the BoE might cap its downside. 

The EUR/GBP cross strengthens to near 0.8320 during the early European trading hours on Monday. The upside of the shared currency might be limited amid rising speculation the European Central Bank (ECB) will implement aggressive interest rate cuts to prop up the faltering regional economy.

Traders raise their bets that the ECB could deliver a bigger half-point rate cut after the downbeat Eurozone Purchasing Managers Index (PMI) data on Friday. This, in turn, might exert some selling pressure on the Euro (EUR) against the Pound Sterling (GBP). 

"This report truly puts a 50-basis-point cut on the table for December,” noted Matthew Landon, JP Morgan Private Bank's global market strategist. Additionally, the ECB Governing Council member Martins Kazaks said that the central bank should lower interest rates next month due to the weak economy. 

The weaker UK Retail Sales and PMI data could boost the Bank of England's (BoE) dovish bets for December and weigh on the GBP. Data released by the Office for National Statistics (ONS) on Friday showed that UK Retail Sales dropped 0.7% MoM in October versus a 0.1% increase (revised from 0.3%) in September. This figure came in below the market consensus of -0.3%.  

However, the cautious stance from the BoE officials might help limit its losses. Traders will monitor the speeches from MPC members Clare Lombardelli, Swati Dhingra, and Huw Pill on Monday for fresh impetus.  

• EUR/GBP strengthens to around 0.8330 in Friday’s early European session, up 0.17% on the day.
• The UK Retail Sales came in at -0.7% MoM in October vs. 0.1% prior. 
• Expectations for more aggressive rate cuts by the ECB might cap the Euro's upside.

The EUR/GBP cross gains momentum to near 0.8330 during the early European session on Friday. The Pound Sterling (GBP) weakens after the release of UK Retail Sales data for October. Later on Friday, traders await the preliminary Eurozone HCOB Purchasing Managers Index (PMI) and the European Central Bank's (ECB) President Lagarde speech for fresh impetus. 

Data released by the Office for National Statistics (ONS) on Friday showed that UK Retail Sales declined 0.7% MoM in October versus a 0.1% increase (revised from 0.3%) in September. This figure came in below the market consensus of -0.3%. Meanwhile, Retail Sales, stripping the auto motor fuel sales, fell by 0.9% MoM in October, compared to a 0.1% rise (revised from 0.3%) in the previous reading, missing the estimation of a 0.4% decline. 

The GBP attracts some sellers in an immediate reaction to the downbeat UK Retail Sales and acts as a tailwind for the EUR/GBP cross. The attention will shift to the preliminary UK S&P Global/CIPS PMI data, which is due later on Friday. 

On the other hand, the rising speculation for more aggressive interest rate cuts by the European Central Bank (ECB) weighs on the shared currency. The ECB policymaker Yannis Stournaras said earlier this week that the central bank will reduce interest rates by 0.25% in December, with further cuts possible in 2025. Additionally, Bank of Italy governor Fabio Panetta said the ECB must commit to faster interest rate cuts in a bid to lift the Eurozone economy. However, Panetta also called on the ECB to ditch its current “meeting-by-meeting” guidance that avoids a longer-term commitment to its monetary policy. 

• EUR/GBP has returned to the range it has been trading in since the end of September. 
• It will probably continue oscillating there until it breaks out either higher or lower.
• The false downside break at the start of November, suggests the range floor may be vulnerable. 

EUR/GBP continues trading in a range. The pair is probably now in a sideways trend and given the principle of technical analysis that “the trend is your friend” it will probably continue oscillating until it makes a decisive breakout one way or another. 
 

EUR/GBP 4-hour Chart 

The pair made a false break on November 8 when it fell to a two-and-a-half year low of 0.8260. However, rather than continuing down to the target generated from the range, EUR/GBP recovered back inside where it now trades. 

Because it is in a sideways trend, however, the odds favor a continuation sideways, which suggests the possibility of a recovery from the current level near the range floor, and the unfolding of a leg up towards the ceiling at around 0.8450. 

It is too early to say with any confidence whether EUR/GBP will indeed rise up to the top of the range. Further, the false break may be a sign of weakness and be followed by another break lower, thus complicating the picture and adding a bearish tone to the chart. 

Assuming a break lower, it is possible the pair could fall to the target established by the range, at 0.8219 – the 61.8% Fibonacci extension.

• EUR/GBP may depreciate as a recent UK inflation report has strengthened the BoE’s caution regarding rate cuts.
• ECB member Yannis Stournaras remarked that the Eurozone is nearing a sustainable attainment of its 2% inflation target.
• The Euro may face challenges as traders expect the ECB to deliver a 25 basis point rate cut in December.

EUR/GBP appreciates after two days of losses, trading around 0.8340 during the Asian hours on Thursday. However, the upside of the EUR/GBP cross could be limited as Wednesday’s stronger-than-anticipated UK inflation report has bolstered the Bank of England's (BoE) cautious approach toward future interest rate reductions.

UK CPI inflation surged to 2.3% year-over-year in October, marking a six-month high, up from 1.7% in September and beating forecasts of 2.2%. The monthly CPI increased by 0.6% after remaining unchanged in September. Meanwhile, Core CPI, which excludes the more volatile food and energy prices, climbed to 3.3% over the same period, outpacing market predictions of 3.1%.

Additionally, Services inflation rose to 5%, up from 4.9% in the previous report. If price pressures continue to build, traders may reconsider expectations for interest rate cuts at the BoE's December policy meeting.

On Wednesday, European Central Bank (ECB) Governing Council member Yannis Stournaras stated that the Eurozone is close to sustainably achieving its 2% inflation target. Stournaras emphasized the responsibility of policymakers to ensure they do not fall short of this goal, according to Bloomberg.

Meanwhile, the EU Financial Stability Review noted that escalating geopolitical tensions and policy uncertainties are intensifying sovereign vulnerabilities while growing global trade disputes heighten the risk of economic shocks. 

Since June, the ECB has implemented three rate cuts as inflation edges closer to the 2% target. However, growth forecasts have been revised downward twice. Markets widely expect a 25 basis point rate cut next month, with a smaller probability of a more substantial reduction.

• EUR/GBP falls after the release of higher-than-expected UK Consumer Price Index data.
• The UK CPI inflation climbed to 2.3% YoY in October, the highest in six months, up from 1.7% in September.
• German Producer Price Index fell by 1.1% YoY in October, marking the 16th consecutive period of producer deflation.

EUR/GBP loses ground to near 0.8330 during the early European hours. The Pound Sterling (GBP) appreciates following the stronger Consumer Price Index (CPI) data from the United Kingdom (UK) released on Wednesday.

The UK CPI inflation climbed to 2.3% year-over-year in October, the highest in six months, up from 1.7% in September and surpassing forecasts of 2.2%. On a monthly basis, the CPI increased by 0.6% after remaining unchanged in September. Meanwhile, the annual Core CPI, which excludes volatile food and energy prices, rose to 3.3% during the same period, exceeding market expectations of 3.1%. Additionally, the Retail Price Index increased by 3.4% year-over-year, compared to 2.7% in September.

In Germany, the Producer Price Index (PPI) fell by 1.1% year-on-year in October, following a 1.4% decline the previous month, in line with market expectations. This marks the 16th consecutive period of producer deflation. On a monthly basis, producer prices rose by 0.2%, rebounding from a 0.5% drop in September, also matching market estimates.

Since June, the ECB has reduced rates three times as inflation approaches its 2% target, although growth forecasts have been downgraded twice. Markets largely anticipate a 25-basis-point rate cut next month, with a smaller chance of a more significant reduction.

On Wednesday, ECB President Christine Lagarde is set to deliver the opening remarks at the ECB’s Conference on Financial Stability and Macroprudential Policy in Frankfurt. Investors will also be closely watching the preliminary Purchasing Managers’ Index (PMI) figures from the Eurozone and Germany, which are scheduled for release on Friday.

• EUR/GBP rises past the 50-day SMA of 0.8359, setting sights on the 0.8400 resistance.
• If breached, next key levels include the 100-day SMA at 0.8413, October 31 high of 0.8448.
• Downside risks remain; a dip below 0.8359 could see consolidation or a retest of the 0.8260 level.

The EUR/GBP extended its gains for the fourth straight day, edged up above the 50-day Simpl Moving Average (SMA), and was exchanging hands at 0.8373 at the time of writing.

EUR/GBP Price Forecast: Technical outlook

After hitting a year-to-date (YTD) low of 0.8260, the EUR/GBP has climbed past the 0.8300 figure, cleared on its way the 50-day Simple Moving Average (SMA) of 0.8359 and paving the way for a test of 0.8400. A breach of the latter will expose the 100-day SMA at 0.8413, followed by the October 31 swing high of 0.8448.

Conversely, if EUR/GBP slips beneath the 50-day SMA at 0.8359, the pair might consolidate within the 0.8300-0.8359 area unless sellers drive the exchange rate below the bottom of the range, which would open the door to test 0.8260.

Indicators such as the Relative Strength Index (RSI) hint buyers are in charge after turning bullish once they clear the 50 neutral line.

EUR/GBP Price Chart – Daily

• EUR/GBP flat lines around 0.8355 in Tuesday’s early European session. 
• ECB’s Vujcic said the risk of undershooting the inflation goal has risen. 
• The UK GDP fell by 0.1% MoM in September, weaker than expected. 

The EUR/GBP cross trades on a flat note near 0.8355 during the early European session on Tuesday. The rising bets for more aggressive rate cuts by the European Central Bank (ECB) might drag the Euro (EUR) lower against the Pound Sterling (GBP). Investors brace for the Eurozone October Harmonized Index of Consumer Prices (HICP) data, which is due later on Tuesday.

The ECB Governing Council member Boris Vujcic said on Monday that the danger that the ECB will fall short of its 2% inflation goal has risen, per Bloomberg. Meanwhile, the ECB policymaker Yannis Stournaras noted that the bank is almost certain to cut interest rates by a quarter point in December. 

The ECB has cut its key interest rate by 25 basis points to 3.25% last month and is anticipated to reduce rates further again in December at its final decision of the year. However, investors await the Eurozone HICP data for fresh impetus about the inflation outlook. If the report shows the hotter-than-expected outcome, this could dampen the hope for the ECB jumbo rate cut, which might lift the shared currency. 

On the other hand, a surprise contraction in UK Gross Domestic Product (GDP) for September could weigh on the GBP. The UK economy shrank by 0.1% MoM in September, following growth of just 0.2% the previous month, according to the Office for National Statistics on Friday. This figure came in weaker than the 0.2% expansion expected. 

However, Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said a rate reduction at the Bank of England’s (BOE) meeting in December now looks “improbable” as inflation concerns and rising global headwinds would likely prevent policymakers from pursuing back-to-back rate cuts. The release of UK Consumer Price Index (CPI) data for October on Wednesday could offer some hints about the rate cuts path for the December meeting.

• EUR/GBP crosses key 0.8350 threshold but faces resistance near 0.8400, with current trading influenced by UK GDP concerns.
• Potential upside could see the cross target the 100-day SMA at 0.8413, with further resistance at the 200-day SMA at 0.8475.
• Downside risks remain if the pair retreats, with support levels at recent lows of 0.8306 and 0.8260.

The Euro recovered some ground versus the British Pound on Monday as traders digested the latest UK Gross Domestic Product (GDP) report, which hinted the economy is slowing down. The EUR/GBP trades at 0.8359, up by 0.11%.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP extended its gains past the psychological 0.8350 area, though buyers remain unable to crack 0.8400. Additionally, sellers leaning to the 50-day Simple Moving Average (SMA) at 0.8360 keep the cross pair from reaching 0.84 despite printing a daily peak of 0.8373.

If bulls clear 0.8373 and 0.84, the next stop would be the 100-day SMA at 0.8413. A breach of the latter will expose the 200-DMA at 0.8475.

Conversely, if EUR/GBP retreats below 0.8350, the first support would be the November 14 low of 0.8306. Once surpassed, the next floor would be the November 11 swing low of 0.8260.

Oscillators such as the Relative Strength Index (RSI) suggest bulls are gathering momentu, as the RSI cleared its neutral line, turning bullish.

EUR/GBP Price Chart – Daily

The big event in the GBP market this week is the release of the October CPI report on Wednesday, ING’s FX analysts Francesco Pesole notes.

‘Core services’ inflation to slow down to 4.3%

“As usual, markets will be looking almost solely at the services inflation figure, which our economist sees accelerating marginally from 4.9% to 5.0%. However, when stripping out categories that are less relevant for the Bank of England, we see a substantial slowdown to 4.3% in ‘core services’ inflation.”

“That would be good news for the BoE, but probably not enough to justify another cut in December. Incidentally, markets might focus a bit more on the ‘non-core’ services CPI figure, sticking to cautious BoE pricing and put a cap on the recent tentative rebound in EUR/GBP.”

“Our view on the pair remains moderately bearish in the near term as we see any dovish repricing in BoE expectations coming after a December outsized ECB cut.”  

• EUR/GBP faces challenges as traders expect the ECB to deliver a rate cut in December.
• The European Commission forecasts 0.8% growth for the Euro Area in 2024, maintaining its projection from the Spring estimate.
• UK Economist Ruth Gregory expects that the BoE will hold interest rates steady at 4.75% in December.

EUR/GBP remains stable near 0.8350 during early European trading hours on Monday. The EUR/GBP cross faces headwinds as the Euro remains under pressure due to the European Central Bank's (ECB) dovish outlook, with a policy rate cut anticipated at its December meeting.

In its Autumn 2024 forecast, the European Commission predicts 0.8% growth for the Euro Area in 2024, unchanged from its Spring estimate. However, the growth projection for 2025 has been slightly lowered to 1.3% from 1.4%, while the Eurozone economy is expected to expand by 1.6% in 2026.

Commenting on the outlook, EU Economy Commissioner Paolo Gentiloni remarked, "As inflation continues to ease and growth in private consumption and investment gains momentum, coupled with record-low unemployment, growth is expected to gradually accelerate over the next two years."

The UK economy expanded by 0.1% quarter-on-quarter in the three months ending September, slowing from the 0.5% growth seen in Q2 and missing market expectations of a 0.2% increase. Year-on-year, UK GDP grew by 1.0% in Q3, aligning with forecasts and improving on the 0.7% growth recorded in Q2. On a monthly basis, GDP contracted by 0.1% in September, reversing a 0.2% gain in August.

Capital Economics’ Deputy Chief UK Economist Ruth Gregory reiterated their expectation that the Bank of England (BoE) will maintain rates at 4.75% in December, with a 25-basis-point rate cut anticipated in February.

UK GDP is a bit disappointing, owing to a surprise fall in activity during September. The 0.1% third-quarter figure is a far cry from the 0.7% and 0.5% in the first and second quarters. Does that show the economy has slowed? Yes, but not as much as the figures suggest, ING’s FX analyst Francesco Pesole notes.

BoE pause in December is the most likely outcome

“A lot of that strength seen in the first half of the year was in non-tradable and non-consumer sectors that have less to do with underlying economic fundamentals. The Bank of England has agreed that the true rate of growth was probably slower in the first half. However, we think the BoE/consensus forecast for the winter is a bit high, and while real wage growth should generate higher GDP, the pace is set to be fairly moderate in the near term before receiving a bit of a budget boost next year.

“GDP was a bit weaker than expected, but it's still not that surprising, particularly given the volatility in the recent data. The BoE is much more focused on the services inflation figures that we'll get next week. In the near-term, they're likely to remain sticky around 5%. Barring a downside surprise, we think a pause in December is the most likely outcome.”

“EUR/GBP has hovered just above 0.830 as a wide rate differential continues to put pressure on the pair. Given we see a low probability of the BoE cutting in December while our call is for a 50bp move by the ECB next month, we struggle to see much upside for EUR/GBP before year-end.”

• EUR/GBP rose by 0.14% to 0.8320 in Thursday's trading session.
• Bears took a breather after recent declines but technical indicators remain deeply negative.
• RSI signals recovering buying pressure while MACD suggests flattening selling pressure, overall outlook mixed.

The EUR/GBP pair rose to 0.8320 in Thursday's session. Despite a temporary respite for the bears after recent declines, technical indicators remain deeply negative, with the pair trading below the 20-day Simple Moving Average (SMA) which stands around 0.8340. This suggests that the short-term outlook remains bearish until this level is conquered.

The Relative Strength Index (RSI) which measures the strength of buying and selling pressure, has a reading of 47 and points up, indicating that buying pressure is recovering. The Moving Average Convergence Divergence (MACD), which is a trend-following indicator, is flat and in red, suggesting that selling pressure is flat. With the RSI suggesting that buying pressure is recovering, while the MACD, it suggests that selling pressure is flat and it points out that the pair may consolidate in the next sessions.

Support levels can be found at 0.8300, 0.8250, and 0.8230, while resistance levels can be found at 0.8340, 0.8360, and 0.8400.

EUR/GBP daily chart