CFD Trading Rate Euro vs Great Britain Pound (EURGBP)

• EUR/GBP rebounds from 0.8500 as ECB Lagarde sees the fight with inflation is not over yet.
• ECB Knot is not uncomfortable with market expectations for rate cuts.
• Investors await the UK Retail Sales data for fresh guidance.

The EUR/GBP pair extends its recovery to 0.8550 in the early American session on Thursday. The cross recovered after discovering strong buying interest near the psychological support of 0.8500. The Euro strengthened against the Pound Sterling after commentary from ECB President Christine Lagarde raised doubts about whether the central bank will really pivot to rate cuts from the June meeting.

On Wednesday, ECB Lagarde commented, “Growth in Europe is mediocre, much slower than in the US”. Lagarde warned that the fight against inflation is not over. Contrary to Lagarde, ECB Governing Council member Klaas Knot said in Thursday’s European session that he is not uncomfortable with the market pricing of ECB rate cuts. Knot added, “he is increasingly confident about the disinflation process.”

Separately, ECB policymaker Joachim Nagel said that he can't rule out small rebounds in inflation in Germany in some months this year.

Meanwhile, traders have reassessed speculation for rate cuts by the Bank of England (BoE) as the Consumer Price Index (CPI) data for March softened at a slower rate than estimated. Investors see the BoE to reduce interest rates only once this year instead of three. Also, the BoE is anticipated to choose the November meeting for starting to reduce interest rates.

Going forward, the Pound Sterling will be guided by the United Kingdom Retail Sales data for March, which will be published on Friday. The monthly Retail Sales are forecasted to have grown by 0.3% after remaining stagnant in February.

• EUR/GBP declines after the release of higher-than-expected UK inflation data suggests UK interest rates could stay high. 
• “This is not what the BoE wants to see,” says TD Securities analyst. 
• Eurozone inflation data comes out in line with expectations, lifting the Euro amid dovish market expectations. 

The EUR/GBP edges lower a fraction on Wednesday to trade at about the 0.8540 level, after the release of macroeconomic data from both the UK and Eurozone. 

In the UK, inflation rose slightly higher than expected in March, according to data from the Office of National Statistics (ONS), on Wednesday. The Consumer Price Index (CPI) in March rose 3.2% year-on-year when a 3.1% rise had been expected. That said it was below the 3.6% of the previous month. 

Core CPI rose 4.2% versus the 4.1% expected reading but was also lower than the previous month. The same was true of the Retail Price Index (RPI) whilst the Producer Price Index showed results either inline with expectations or slightly below them. 

The data gave a lift to the Pound Sterling, perhaps because it reduces the probabilities that the Bank of England (BoE) will be able to start reducing interest rates. 

“Overall, this is not what the BoE wants to see, in particular after the stronger than expected wage numbers out yesterday," said analysts at TD Securities, responding to the data.  

It means the BoE may need to keep interest rates higher for longer in order to combat stickier-than-expected inflation. Higher interest rates tend to appreciate a currency as they lead to higher foreign capital inflows. 

EUR/GBP recovered some lost ground following the release of the final estimate for the March Eurozone Harmonized Index of Consumer Prices (HICP), on Wednesday. 

The data showed no change from the flash reading, which showed a 2.4% YoY rise in HICP and 2.9% in core HICP. Both readings were still below the 2.6% and 3.1% readings respectively for February. 

The Euro (EUR) may have been lifted because market expectations had overall declined in relation to Eurozone inflation. Recent dovish comments from European Central Bank (ECB) officials, have suggested an increasing willingness to cut interest rates because of falling inflation and stuttering growth, and this could have been responsible for the lower outlook. 

ECB President Christine Lagarde, for example, said on Tuesday that the ECB will cut rates soon, bar a surprise, and that the ECB was keeping a close eye on Oil prices due to Middle East tensions.

• EUR/GBP moves negatively after paring intraday gains amid mixed UK inflation figures.
• UK CPI MoM remained stable at a 0.6% increase in March, while the YoY index rose by 3.2%, exceeding expectations.
• Traders shift their focus on the Eurozone Harmonized Index of Consumer Prices, set to be released Wednesday.

EUR/GBP faces downward pressure following mixed Consumer Price Index (CPI) data from the United Kingdom (UK). The EUR/GBP pair dips to near 0.8540 during the Asian session on Wednesday. Market attention now turns to the Eurozone Harmonized Index of Consumer Prices (HICP) for March, set to be released later in the day.

In March, UK CPI (MoM) maintained a steady pace of 0.6%, while year-over-year Consumer Inflation increased by 3.2%, slightly above the expectations of 3.1% but lower than the previous 3.4%. Meanwhile, Core CPI YoY rose by 4.2%, surpassing expectations of 4.1% but lower than the previous 4.5%.

The Pound Sterling (GBP) faces downward pressure as investors anticipate two rate cuts by the Bank of England (BoE) this year, with the initial move likely in August or September. BoE Governor Andrew Bailey stated on Tuesday that there is compelling evidence indicating a decline in UK inflation. The key question for BoE policymakers, according to Bailey, is how much additional evidence is needed before considering interest rate cuts.

On the other side, the Euro faces challenges amid growing speculation that the European Central Bank (ECB) will commence interest rate cuts in June, driven by a tepid Eurozone economic outlook and moderating core inflationary pressures.

During an interview with CNBC on Tuesday, ECB President Christine Lagarde suggested that rate cuts are imminent, barring any significant unforeseen developments. Lagarde remarked that the ECB is observing a disinflationary trend that aligns with expectations. Additionally, she noted that geopolitical events' influence on commodity prices has been relatively limited thus far.

• EUR/GBP sees a downside below 0.8530 as the ECB is expected to begin reducing interest rates from August.
• Eurozone core CPI has consistently declined in the last eight months.
• The Pound Sterling holds strength against the Euro despite poor UK labor market data.

The EUR/GBP pair struggles to hold an auction above the immediate support of 0.8530 in the early European session on Tuesday. The cross remains under pressure as the Euro weakens amid expectations that the European Central Bank (ECB) will be second among central banks from developed nations that will pivot to rate cuts.

ECB policymakers see market expectations for the central bank starting to reduce borrowing rates from the June meeting as reasonable. The annual core Consumer Price Index (CPI) that excludes volatile food and energy prices has come down significantly to 2.9% in March. Eurozone core CPI is consistently declining from last eight months, suggesting that inflation is sustainably declining to the 2% target.

Last week, the ECB kept its Main Refinancing Operations Rate unchanged at 4.5% as expected. In a monetary policy conference, ECB President Christine Lagarde said if a fresh assessment increases policymakers' confidence that inflation is heading back to target, then it "would be appropriate" to cut interest rates, Reuters reported.

Meanwhile, the Pound Sterling has been underpinned against the Euro due to strong speculation that the ECB will sooner pivot to rate cuts but is performing weak against the US Dollar. The Pound Sterling faces pressure as weak labor market data for the quarter through February has exhibited a poor economic outlook.

The United Kingdom Office for National Statistics (ONS) reported that the Unemployment Rate climbed sharply to 4.2% from expectations of 4.0% and the prior reading of 3.9%. UK employers laid off 156K workers in February, higher from 89K in January.

Going forward, investors will focus on the UK Consumer Price Index (CPI) data for March, which will be published on Wednesday. The inflation data will significantly influence market expectations for Bank of England (BoE) rate cuts, which are currently anticipated from the August meeting.

Analysts at Rabobank share their view on the Pound Sterling's short-term outlook against the Euro and the US Dollar.

EUR/GBP to dip to 0.84 in the second half of 2024

"It has been our view for some time that EUR/GBP could break below the 0.85 level this year. This view is based on the forecast of a slower start to BoE rate cuts. It also assumes that the UK election, which is expected before the end of the year, is unlikely to create many shockwaves.  Opinion polls strongly suggest that a Labour government will be entering Downing St after the election. While the shadow cabinet has kept its cards close to its chest in terms of policy details, the Starmer leadership has been keen to woo the business sector. Additionally, the poor state of public finances suggests little room for manoeuvre for the new Chancellor. The latter implies that the election could be a reassuringly boring event for markets."

"The weeks and months ahead could bring more geopolitical induced volatility for asset prices and in particular for the safe haven USD.  This risk, combined with the resilience of the US economy, suggests a strong probability of further dips in the value of GBP/USD. EUR/GBP, however, should be less impacted. We continue to expect that EUR/GBP will dip to the 0.84 level in the second half of this year. That said, the EUR/GBP0.8530 level is likely to offer near-term support."

• EUR/GBP continues to lose ground despite improved Eurozone manufacturing data.
• Eurozone Industrial Production (MoM) rose by 0.8% in February, swinging from a 3.0% decrease in January.
• The Pound Sterling might have received support from the hawkish remarks from BoE’s policymaker.

EUR/GBP moves downward to near 0.8540 during the European trading hours on Monday. The Euro (EUR) failed to react to the improved data from the Eurozone’s manufacturing sector. The seasonally adjusted Industrial Production increased by 0.8% MoM in February, swinging from the previous decline of 3.0%. The annual index reduced by 6.4% for the said period, lower than the previous decrease of 6.6%.

The EUR encountered struggles against the GBP following the European Central Bank's (ECB) indication that there might be a consideration to lower policy rates in June if underlying inflation continues to decelerate as anticipated.

According to Reuters, Gediminas Šimkus, a member of the ECB Governing Council, suggested on Monday above 50% probability of witnessing more than three rate cuts throughout the year.

The Pound Sterling (GBP) appreciates on adjusting market forecasts for interest rate cuts by the Bank of England (BoE). The policy rate is now expected to decline to around 4.75% by the end of 2024, down from the current rate of 5.25%. This marks a shift from the previous expectation of a drop to 4.5% by December.

Additionally, the hawkish remarks from BoE’s policymaker, Megan Greene have supported the British Pound (GBP), which might have contributed to pressure on the EUR/GBP cross. She emphasized that rate cuts in the United Kingdom (UK) should still be considered distant, pointing to a greater risk of persistent inflation in the country.

Traders will likely pay close attention to the speech by Sarah Breeden, BoE's Deputy Governor for Financial Stability, at the Innovate Finance Global Summit 2024 on Monday.

• EUR/GBP drifts lower on Thursday, albeit manages to hold above a one-week low.
• Bets for more aggressive policy easing by the BoE cap the GBP and lend support.
• Traders might also refrain from placing aggressive bets ahead of the ECB meeting.

The EUR/GBP cross struggles to capitalize on the previous day's goodish rebound from the 0.8545 area, or a one-week low and meets with a fresh supply on Thursday. Spot prices remain depressed through the early European session and currently trade around the 0.8560 region as traders keenly await the European Central Bank (ECB) meeting before placing fresh directional bets.

The ECB is widely expected to keep its main refinancing rate unchanged and hence, the focus will remain on the fresh round of staff projections, which will be scrutinized for cues about the timing of any upcoming interest rate cut. The markets have been pricing in a greater chance of the first rate cut in June amid a faster-than-anticipated fall in the Eurozone inflation. This, in turn, is seen undermining the shared currency and exerting some pressure on the EUR/GBP cross.

Hence, the outlook, along with ECB President Christine Lagarde's comments at the post-meeting press conference, will play a key role in influencing the shared currency in the near term and provide some meaningful impetus to spot prices. Heading into the key central bank event risk, rising bets for at least four interest rate cuts this year by the Bank of England (BoE), starting in June, should cap the upside for the British Pound (GBP) and limit losses for the EUR/GBP cross.

From a technical perspective, the recent failure near the 100-day Simple Moving Average (SMA) and the subsequent downfall favours bearish traders. The aforementioned fundamental backdrop, however, makes it prudent to wait for strong follow-through selling before positioning for any meaningful downside and an eventual breakdown through the 0.8500 psychological mark, or the YTD low touched in February.

• The EUR/GBP daily chart reveals a consolidating bullish momentum.
• In the hourly chart, the EUR/GBP portrays weaker buying traction, with RSI declining deep into negative terrain.
• The pair remaining above the 20-day SMA reveals a short-term bullish bias.
• The cross encountered strong resistance at 0.8580 at the 100-day SMA.

The EUR/GBP pair is currently trading at 0.8566, seeing mild losses. Despite the recent positive momentum, there is a notable resistance at the 0.8580 level, potentially capping further rise. Moreover, the pair remains under key long-term Simple Moving Averages (SMAs), suggesting that any potential gains could face strong resistance due to the overarching bearish sentiments.

On the daily chart, the Relative Strength Index (RSI) shows that the EUR/GBP pair is manifesting positive momentum in bullish territory. The most recent RSI reading for today's session reveals a minor decline to 53, suggesting that despite a slight consolidating buyers possess a slight edge over sellers. The Moving Average Convergence Divergence (MACD) histogram exhibits flat green bars, indicating a consistent positive momentum behind the pair's recent movements.

EUR/GBP daily chart

In contrast, the hourly chart for the EUR/GBP pair displays a disparate picture, with recent RSI readings falling deep in negative territory, towards 35. Given the downward RSI trend and the MACD histogram exhibiting flat red bars, short-term momentum appears to lean toward sellers.

EUR/GBP hourly chart

Observing the wider perspective, the EUR/GBP stands above its 20-day Simple Moving Average (SMA), indicative of a short-term bullish inclination. However, this movement is checked by the prospective resistance at the 100-day SMA at the 0.8580 mark, which could restrict further upward progression. Echoing a longer-term concern, the pair currently resides below its 200-day SMA, signaling a sustained bearish trend. This positioning suggests increasingly robust selling pressure over time,  as the EUR/GBP has failed to escalate beyond the significant 100-day SMA. That being said, if buyers hold their momentum on the daily chart and regain the mentioned SMA, the outlook might shift in favor of the buyers.

• EUR/GBP faces rejection near the 100-day SMA and snaps a seven-day winning streak.
• The better-than-expected BRC Like-For-Like Sales underpin the GBP and exert pressure.
• Bets for more aggressive policy easing by the BoE should cap the GBP and lend support.

The EUR/GBP cross continues with its struggle to make it through the 100-day Simple Moving Average (SMA) hurdle and meets with some supply on Tuesday. Spot prices remain depressed near the 0.8575 region through the first half of the European session and for now, seem to have snapped a seven-day winning streak.

The British Pound's (GBP) relative outperformance against its European counterpart could be attributed to the upbeat domestic data, which showed that Like-For-Like Retail Sales surged by the 3.2% YoY rate in March. This was better than the 1.8% rise expected and marked the strongest growth since August 2023, which, in turn, is seen as a key factor exerting some downward pressure on the EUR/GBP cross.

Apart from this, speculations that the European Central Bank (ECB) could cut interest rates soon amid a faster-than-anticipated fall in the Eurozone inflation undermine the shared currency and contribute to the offered tone surrounding the pair. That said, rising bets for at least four interest rate cuts this year by the Bank of England (BoE), starting in June, might cap the GBP and lend some support to the EUR/GBP cross.

This, in turn, warrants some caution before positioning for any further downfall in the absence of any relevant economic data due on Tuesday, either from the UK or the Eurozone. Meanwhile, the BoE Governor Andrew Bailey's appearance might influence the Sterling Pound and provide some impetus to the EUR/GBP cross. The focus, however, will remain on the monthly UK GDP print and factory data for February, due for release on Friday.

• EUR./GBP gains some follow-through traction and climbs to a near two-week high on Friday.
• Bets for more aggressive policy easing by the BoE undermine the GBP and remain supportive.
• An upward revision of the UK Construction PMI does little to provide any meaningful impetus.

The EUR/GBP cross prolongs this week's goodish bounce from the 0.8530 support area for the fifth straight day and climbs to a one-and-half-week high during the first half of the European session. Spot prices currently trade around the 0.8585 region, with bulls now awaiting a sustained strength beyond the 100-day Simple Moving Average (SMA) before positioning for any further gains.

The British Pound (GBP) continues with its relative underperformance in the wake of rising bets for at least four interest rate cuts this year by the Bank of England (BoE), starting in June, which, in turn, is seen acting as a tailwind for the EUR/GBP cross. The GBP bulls, meanwhile, seem unaffected by an upward revision of the UK Construction PMI, which moved into expansion territory last month for the first time since August 2023. Meanwhile, the shared currency draws support from an upward revision of the Eurozone Services PMIs for March and hawkish comments from the European Central Bank (ECB) Governing Council member Robert Holzmann earlier this week. 

Holzmann – a known hawk – said on Wednesday that he isn’t against a June interest rate cut but would want to see more data before making a decision. This further contributes to the bid tone surrounding the EUR/GBP cross. Meanwhile, inflation in the Eurozone has been falling faster than expected, which has been fueling speculations that the ECB could cut rates sooner rather than later. This might hold back the Euro bulls from placing aggressive bets and keep a lid on any further appreciating move for the currency pair. Hence, it will be prudent to wait for some follow-through buying before confirming that spot prices have bottomed out in the near term.

From a technical perspective, momentum beyond the 100-day SMA is likely to confront stiff resistance near the very important 200-day SMA, currently pegged near the 0.8600 mark. A sustained strength beyond the said handle will be seen as a fresh trigger for bullish traders and set the stage for some meaningful upside for the EUR/GBP cross.

• EUR/GBP continues its winning streak amid possible rate cuts by major central banks.
• The Pound Sterling faces challenges as the BoE is expected to initiate rate cuts in June, with odds standing at 66%.
• ECB's Pablo Hernandez stated that recent inflation data aligns with the central bank's mandate of achieving its inflation objective.

EUR/GBP continues its winning streak that began on March 29, climbing to near 0.8570 during the European trading hours on Thursday. The easing of global inflationary pressures has led to speculation about potential interest rate cuts by central banks.

Money market futures traders are anticipating a 25 basis point rate cut by the Bank of England (BoE) in June, with odds currently standing at 66%. On the other side, the Eurozone annual rate of inflation declined more than expected in March, prompting speculation that the European Central Bank (ECB) may cut interest rates in June.

On Wednesday, the Eurozone Harmonized Index of Consumer Prices (HICP) for March was reported at a year-over-year rate of 2.4%, missing the market estimation of an unchanged 2.6% rise in the reported period.

BoE Governor Andrew Bailey has recently commented that, with further encouraging signs indicating a cooling inflation trend, the UK economy is moving towards a point where the central bank could consider interest rate cuts. ECB policymaker Pablo Hernandez de Cos stated on Wednesday that he is not explicitly providing forecasts on future monetary policy. However, he mentioned that recent inflation data is in line with the central bank's mandate of achieving its inflation objective.

Pablo Hernandez also mentioned that the ECB could begin cutting interest rates in June due to a sustained slowdown in inflation across the bloc. Additionally, ECB policymaker Robert Holzmann remarked that the central bank might initiate interest rate cuts in June, as inflation could decline more rapidly than initially anticipated.

• EUR/GBP gains ground near 0.8565 in Wednesday’s early European session. 
• BoE’s Bailey said UK economy is moving towards the point where the central bank can begin cutting rates.
• ECB’s Holzmann said he has ‘no in-principle objection’ to a June rate cut, but wants to see more supportive data.
• The preliminary Eurozone HICP inflation data for March will be in the spotlight on Wednesday. 

The EUR/GBP cross trades in positive territory for the fourth consecutive day around 0.8565 on Wednesday. The rising expectation that the Bank of England (BoE) will lower its borrowing cost in June exerts some selling pressure on the Pound Sterling (GBP).

The BoE Governor Andrew Bailey said in recent weeks that, due to further encouraging signs that inflation is cooling, the UK economy is moving towards the point where the central bank can begin cutting interest rates. Meanwhile, BoE interest-rate setter Jonathan Haskel said rate cuts should be "a long way off, although the fall in headline inflation is very good news. Jeremy Hunt, Chancellor of the Exchequer, stated that as inflation gets closer to its target that opens the door for the BoE to consider lowering interest rates. 

On the Euro front, the European Central Bank (ECB) policymaker Robert Holzmann said on Wednesday that he has ‘no in-principle objection’ to a June rate cut, but wants to see more supportive data before the central bank could start cutting interest rates. The ECB's policymaker Yannis Stournaras said on the weekend that the ECB could possibly cut rates by a total of 100 basis points this year, but there was still no consensus within the Eurozone's central bank on that. 

ING economist, Carsten Brzeski, said that wage developments remain key and as long as the economy doesn’t fall off a cliff, the ECB will remain restrictive on policy and wait for more evidence on data. The less dovish stance of the ECB might lift the Euro (EUR) against the GBP and create a tailwind for the EUR/GBP cross. 

Later on Wednesday, the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for March will be released. In case the report shows the easing inflation in the Euro area in March, this could bolster hopes that the ECB will soon start cutting interest rates and weigh on the EUR. 

• EUR/GBP trades marginally down as the Pound Sterling outperforms the Euro.
• The final estimate of the UK Manufacturing PMI is revised above 50 signifying growth in the sector. 
• The interest outlook for the Eurozone and Britain are broadly similar leading to a range bound dynamic. 

EUR/GBP edges lower into the 0.8550s on Tuesday, on the back of strong UK Manufacturing data. The pair, however, remains plum in the middle of its long-term range stretching the length of 0.8500.  

The S&P Global/CIPS Manufacturing PMI final reading for March showed a revision to above the 50 level distinguishing growth from contraction, and beating the preliminary estimate of 49.9, according to data from S&P Global. It is the first time since 2022 that the gauge has risen above 50. 

In comparison Eurozone Manufacturing failed to move above the 50 level even though it also came out above preliminary estimates. HCOB Eurozone Manufacturing PMI rose to 46.1 in March, beating the flash estimate of 45.7.  

UK House Prices lower-than-expected despite rise in mortgages 

On Tuesday, data from the UK’s largest building society Nationwide showed UK house prices rose by 1.6% YoY in March, falling short of estimates of 2.4% but higher than February’s 1.2%. 

On a monthly basis prices fell 0.2% after rising 0.7% in February, and below estimates of 0.3%. 

Despite the fall in house prices, UK Mortgage Approvals rose by 60.332K, which was above the expected 56.500K and the previous figure, according to data from the Bank of England (BoE). 

Borrowing was mixed according to the BoE data, with Net Lending for Mortgages higher but UK Consumer Credit lower. Consumer credit fell to 1.378 billion GBP borrowed in February – below forecasts of 1.600 billion, and below the previous 1.770 billion figure. 

The Euro seemed unfazed, meanwhile, by the release of lower-than-expected German inflation data, which showed the Harmonized Index of Consumer Prices slowing to 2.3% YoY in March when 2.4% had been forecast, from 2.7% previously. 

Similar interest-rate outlook 

A broadly similar outlook for interest rate policy in the two jurisdictions – a major driver for FX markets – does little to change EUR/GBP’s habit over the last two months of seesawing between tepid gains and losses. 

According to comments from BoE Governor Andrew Bailey, market forecasts for three 0.25% reductions in 2024 are reasonable, given the BoE isn't observing significant inflationary pressures. Lower interest rates are negative for the Pound Sterling as they reduce foreign capital inflows. 

His statements fuel expectations for the BoE to implement interest rate cuts in June, consequently exerting downward pressure on the Pound Sterling (GBP).

The European Central Bank (ECB) is similarly expected to cut interest rates in June.  Over the Easter weekend ECB policymaker Robert Holzmann indicated that interest rate cuts in June are probable, but contingent upon the evolution of wage and price data. 

Additionally, ECB Governing Council member Yannis Stournaras said on Sunday that there could be a total of four (0.25%) interest rate cuts in 2024, amounting to a cumulative reduction of 100 basis points (bps) by the end of the year.

• EUR/GBP trims intraday losses after weaker Nationwide Housing Prices data from the United Kingdom.
• Germany’s HCOB Manufacturing PMI increased to 41.9 in March, from the previous reading of 41.6.
• UK Housing Prices stood at 1.6% in March, falling short of the expected 2.4% rise.

EUR/GBP trims intraday losses after weaker housing data from the United Kingdom (UK). However, the cross remains in the negative territory and trades around 0.8550 during the European trading hours on Tuesday.

In March, non-seasonally adjusted Nationwide Housing Prices witnessed a year-over-year increase of 1.6%, falling short of market expectations of a 2.4% rise and trailing the previous figure of 1.2%. The monthly index indicated a decrease of 0.2%, contrary to the anticipated increase of 0.3% and the previous increase of 0.7%. Traders are expected to evaluate the UK economic landscape by closely monitoring key indicators such as the S&P Global PMI and Halifax House Prices data.

BoE Governor Andrew Bailey remarked that market forecasts for three quarter-point rate reductions in 2024 are reasonable noting that the UK central bank isn't observing significant persistent inflationary pressures. These statements have fueled expectations for the BoE to implement interest rate cuts in June, consequently exerting downward pressure on the Pound Sterling (GBP).

Germany’s HCOB Manufacturing PMI rose to 41.9 in March, from the previous reading of 41.6. Furthermore, traders await Consumer Price Index (CPI) data from Germany scheduled to be released later in the day. Wednesday brings Harmonized Index of Consumer Prices (HICP) data from the Eurozone.

The Euro struggles after the dovish remarks from the European Central Bank’s (ECB) members, which in turn, undermined the EUR/GBP cross. ECB Governing Council member Yannis Stournaras proposed on Sunday that there could be a total of four interest rate cuts in 2024, amounting to a cumulative reduction of 100 basis points (bps) by the end of the year. Additionally, ECB policymaker Robert Holzmann indicated that interest rate cuts are probable, contingent upon the evolution of wage and price dynamics by June.

• EUR/GBP edges lower on dovish comments made by ECB members.
• ECB’s Yannis Stournaras hinted four rate cuts, amounting to a reduction of 100 bps, could take place in 2024.
• The Bank of England could initiate three quarter-point rate reductions in 2024.

EUR/GBP retraces its gains registered in the previous session, hovering around 0.8550 during the early European hours on Monday. European Central Bank (ECB) Governing Council member Yannis Stournaras suggested on Sunday that a total of four interest rate cuts could occur in 2024, resulting in a total reduction of 100 basis points (bps) by year-end. This has added pressure to undermine the EUR/GBP cross.

However, the anticipation of the Bank of England (BoE) initiating three quarter-point rate reductions in 2024 could continue to exert pressure on the GBP. Weak economic data indicating that the UK economy slipped into recession in the second half of 2023 has contributed to limiting this retracement. BoE Governor Andrew Bailey's statement hinting at potential interest rate cuts in future policy meetings has further weighed on the Pound Sterling (GBP).

With a dearth of high-impact data expected from the United Kingdom (UK) throughout the week, traders are anticipated to assess the UK economic landscape by closely observing indicators such as Nationwide Housing Prices, S&P Global PMI, and Halifax House Prices data, which are scheduled for release during the week.

ECB policymaker Robert Holzmann stated that interest rate cuts are likely to come, but it will depend on what wage and price developments look like by June. Furthermore, attention will be drawn to the German Consumer Price Index (CPI) slated for release on Tuesday, and the Eurozone Harmonized Index of Consumer Prices data, which will be eyed on Wednesday.

• The daily chart reveals a mostly bearish environment with somewhat flat indicators.
• The hourly chart analysis depicts a potential bearish shift with the RSI reading close to the neutral-negative zone.

The EUR/GBP pair is currently trading at 0.8550, with minor losses on Friday’s session. The sellers are exerting their presence as bullish momentum remains weak and the fact that the cross remains below its main Simple Moving Averages (SMAs) of 20,100 and 200-days contributes to the bearish bias.

On the daily chart, the Relative Strength Index (RSI) currently resides in negative territory but stands flat while the Moving Average Convergence Divergence (MACD) prints neutral green bars, suggesting stagnant momentum. This demonstrates the trend might continue in the near term.

EUR/GBP daily chart

Moving to the hourly chart, the RSI shows a mixed trend with readings ranging from 33 and then recovering to 50 standing on the edge of the neutral-negative territory. Coupled with flat green bars on the MACD histogram, there might be a shift towards a bearish momentum after the bulls' short recovery during the European session.

EUR/GBP hourly chart

In conclusion, both the daily and hourly analyses point to a primarily negative trend for EUR/GBP, albeit with potential hourly fluctuations. If the buyers want to avoid losses they should reclaim the 200-day SMA around 0.8550 and build support around it.

• EUR/GBP edges lower on dovish remarks from ECB policymakers.
• ECB’s Villeroy has expressed confidence in the ECB's inflation target of 2%, but he has also cautioned about the increasing downside risks.
• BoE official Jonathan Haskel said that rate cuts should be "a long way off”.

EUR/GBP continues its downward movement, influenced by challenges facing the Euro following dovish comments from European Central Bank (ECB) policymaker Francois Villeroy. During the Asian session on Friday, the EUR/GBP cross depreciates to near 0.8540.

Villeroy highlighted a notable decline in core inflation. He expressed confidence in the ECB to achieve an inflation target of 2% but cautioned about escalating downside risks if the ECB hesitates to implement rate cuts.

Moreover, ECB executive board member Fabio Panetta emphasized on Thursday that the conditions for implementing monetary policy easing are emerging. He pointed out that restrictive policies are dampening demand, resulting in a rapid decrease in inflation. Panetta also indicated a reduction in risks to price stability.

The Pound Sterling (GBP) maintains its position, possibly due to the hawkish comments from the Bank of England official Jonathan Haskel. He said that rate cuts should be "a long way off," while his colleague Catherine Mann warned against overly high expectations for interest rate cuts this year.

Despite Bank of England officials expressing reluctance towards rate cuts, the British Pound (GBP) may have faced downward pressure following economic data indicating that the United Kingdom’s (UK) economy entered a recession in the second half of 2023. The nation's Gross Domestic Product (GDP) contracted by 0.3% quarter-on-quarter in the fourth quarter of 2023, in line with preliminary estimates.

Speculation persists that the Bank of England (BoE) will initiate three quarter-point reductions in rates throughout 2024. BoE Governor Andrew Bailey stated that interest rate cuts will be under consideration at future BoE policy meetings.

• EUR/GBP faces sell-off near 0.8570 on poor German Retail Sales for February.
• Monthly German Retail Sales surprisingly dropped by 1.9% against expectations of 0.3% growth.
• BoE Haskel sees rate cuts are far away.

The EUR/GBP pair falls back from 0.8570 as German Retail Sales data for February remains weaker than expected. Monthly Retail Sales surprisingly contracted by 1.9% against the consensus of 0.3% growth. In January, Retail Sales dropped by 0.4%. Annually, sales at retail stores were declined at a higher pace of 2.7% against expectations of -0.8% and the former decline of 1.4%.

The Retail Sales data is an indicator of the current status of consumer spending, which accounts for a major part of the economy. Weak Retail Sales data indicates deepening cost of living crisis due to high interest rates by the European Central Bank (ECB).

Poor Retail Sales could force ECB policymakers to discuss more about reducing interest rates early. Weak German Retail Sales tend to influence ECB policymakers heavily as it is the largest economy of Eurozone in term of Gross Domestic Product (GDP). ECB policymaker Madis Muller said on Tuesday that “we're closer to a point where ECB can start cutting rates.” Easing wage growth has fuelled ECB’s rate-cut expectations for the June meeting.

Meanwhile, the Pound Sterling remains unchanged even though Bank of England (BoE) policymaker Jonathan Haskel delivers a hawkish guidance on interest rates. BoE Haskel said on late Wednesday to the Financial Times that rate cuts should be "a long way off." Haskel warned that, “fall in headline inflation is good news. However, he doesn’t think the headline figures give a good guide to the persistence.”

• EUR/GBP exhibits a sideways movement ahead of ECB members’ speeches on Wednesday.
• BoE MPC Member Catherine Mann thinks that the central bank is pricing in too many cuts.
• The Euro could face pressure on speculation of an ECB rate cut in June.

EUR/GBP consolidates around 0.8580 during the European session on Wednesday. Bank of England (BoE) Monetary Policy Committee (MPC) Member Catherine Mann cited softening labor market conditions and slowing services inflation as factors influencing her decision to vote in favor of holding interest rates on Thursday. This stance has buoyed hopes among investors for the implementation of a looser monetary policy by the BoE.

Mann cautioned that financial markets are anticipating an excessive number of interest rate cuts this year and suggested that the Bank of England (BoE) is unlikely to act before the US Federal Reserve. She stated, "I think they're pricing in too many cuts."

The EUR/GBP cross could have received upward support following the release of softer-than-expected inflation data for February in the United Kingdom. This development has reshaped market expectations for the Bank of England (BoE) to potentially lower interest rates starting from the June meeting.

The Euro could face downward pressure due to growing speculation of a rate cut by the European Central Bank (ECB) in June. ECB policymaker Madis Muller indicated on Tuesday that the central bank is approaching a juncture where rate cuts may begin. Furthermore, ECB official Yannis Stoumaras noted a consensus for a rate cut in June.

Traders are expected to closely monitor speeches from ECB Chief Economist Philip Lane and ECB Executive Board member Piero Cipollone on Wednesday, along with the release of the European Commission’s Business Climate and Consumer Confidence data for March. On the United Kingdom’s (UK) side, BoC Financial Policy Committee (FPC) Minutes and Statement will be released later in the day.