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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 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.
EUR/GBP has formed a possible Double Bottom reversal pattern at key support lows for the pair during the month of March. If the pattern plays out as expected it would lead to substantial gains for EUR/GBP.
Euro to Pound Sterling: Daily chart
According to the chart above, the Double Bottom completed on March 21, when the exchange rate nudged above the Neckline – a level that joins the peaks of the Double Bottom and provides a confirmation level. According to tech lore, once the neckline is broken it usually means price will go higher.
Although EUR/GBP price did go higher, upside after March 21 was limited. The pair rallied up to a high of 0.8602 on the following day, stuttered and then fell back down. It has since found support at the level of the neckline.
This may potentially just be a retest prior to more upside, however, to be sure a break above the March 22 high of 0.8602 would provide better confirmation.
A move higher would meet its first, more conservative target at the 0.618 Fibonacci extension of the height of the Double Bottom extended higher from the Neckline. This gives an initial price objective of 0.8624. This would be followed by the more ambitious target of the full height of the pattern extrapolated higher (1.000 Fib. ratio) at 0.8654.
The Moving Average Convergence/ Divergence (MACD) is converging bullishly with price at the two troughs of the Double Bottom. This provides further supporting evidence the pattern could lead to more upside.
A break below the 50-day Simple Moving Average (SMA) at 0.8549 prior to completion of the conservative target would indicate the pattern was no longer valid.
This would also be a bearish sign suggesting a move down to retest the long-term support lows at 0.8504. These lows have been touched on multiple occasions and present a significant level, which if broken would lead to a volatile move down, potentially to around the 0.8440s.
The EUR/GBP pair is struck in a tight range around 0.8580 after a slight correction from the crucial resistance of 0.8600. The cross is expected to move high as the United Kingdom’s softer-than-expected inflation data for February has revamped market expectations for the Bank of England (BoE) reducing interest rates from the June meeting.
Prior to February’s inflation data, investors were anticipating that the BoE would start cutting key borrowing rates from August. Meanwhile, the BoE’s slight dovish guidance on interest rates has also reinforced expectations for rate cuts in June. The BoE said in its monetary policy statement that the market’s view of two or three rate cuts this year is not ‘unreasonable.’ The central bank also said that inflation is moving in the right direction.
Last week, BoE Governor Andrew Bailey said in an interview with the Financial Times that rate cuts are "in play" this year. In addition, BoE policymaker Catherine Mann, who remained a hawk among the nine-member-led Monetary Policy Committee (MPC) team, surprisingly voted for a steady interest rate decision.
In Tuesday’s European session, Catherine Mann clarified that she “Changed her vote on rates due to consumers disciplining firms pricing, changing dynamic in labor markets and financial market curve.” However, Mann warned that markets are pricing in too many rate cuts.
On the Eurozone front, investors hope that the European Central Bank (ECB) will start reducing interest rates sooner. 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 the ECB’s rate-cut expectations for the June meeting.
EUR/GBP was close to unchanged on the day in Monday's session. Economists at ING analyze Pound Sterling’s outlook.
The GBP swap curve has recorded a moderate hawkish repricing since the start of the week, although it continues to signal a 25% implied probability of a rate cut by the Bank of England at the May meeting. That is a higher expected chance than for the Fed (also May), and the ECB (April).
When looking at the pricing for December, this is now very similar for the BoE (-76 bps) and the Fed (-80 bps), while ECB expectations remain more dovish (-97 bps). In our view, however, markets are expecting too much easing in the eurozone. We expect 75 bps. Meanwhile, we see the BoE cutting by 100 bps and the Fed by 125 bps by year-end.
Since we forecast the USD decline to start materialising in the coming weeks, we see GBP/USD being supported. However, EUR/GBP, which is a mirror of the BoE-ECB rate expectation gap, may not re-explore the low 0.8500’s seen in February and early March.
The Pound Sterling (GBP) is consolidating at slightly lower levels after the Bank of England's dovish bout of communications late last week. Economists at ING analyze GBP outlook.
Thursday's dovish statement and minutes were backed up by an interview from Governor Andrew Bailey in the Financial Times on Friday. Here, he implied that multiple rate cuts would be coming through this year. That dovish turn from the BoE helps cement the 0.8500 floor for EUR/GBP – which now can work its way slowly towards the 0.8700 area over the coming month.
Given our Dollar view, we are not too bearish on GBP/USD and would expect some decent demand to emerge under 1.2600.
EUR/GBP nears the 0.8600 level. Economists at Société Générale analyze the pair’s technical outlook.
EUR/GBP recently defended the low of last August near 0.8490 and evolved within a small base. It has crossed above the upper limit denoting potential upside. The move has so far remained contained near 200-DMA at 0.8610 which is also a multi month trend line.
Daily MACD has entered positive territory first time since January highlighting regain of upward momentum.
Once the pair establishes above 0.8610, the up move is likely to extend. In such a scenario, next objective could be located at 0.8665, the 61.8% retracement from November 2023.
Last week low of 0.8530 is near-term support.
The Pound Sterling (GBP) sold off on news that the two BoE hawks have now opted for unchanged rates. Economists at ING analyze GBP outlook.
The Bank of England opted for a more dovish than expected communication. Despite keeping its guidance unchanged (rates to be restrictive for an extended period of time), the two most hawkish members changed their vote from a hike to a hold, and there was a mention in the minutes that rates can still be restrictive even with rate cuts.
All this isn’t hugely surprising, after all the real policy rate has continued to inch higher with inflation declining. Still, markets are largely reading this as an acknowledgement that cuts aren’t too far away, and are now increasingly convinced the BoE will start easing in June (20 bps priced in), along with starting to speculate on a May move (7 bps priced in).
EUR/GBP may struggle to find much more support above 0.8600 as UK data still has to validate the recent repricing of the Sonia curve.
EUR/GBP trims its intraday losses and rises to near 0.8590 during the early European session on Friday. The cross remains in negative territory despite positive Retail Sales data from the United Kingdom (UK).
UK Retail Sales (Month-on-Month) for February showed no growth, printing a reading of 0.0%, compared to the expected decline of 0.3% and the 3.4% growth recorded in January. However, Core Retail Sales, which exclude auto and motor fuel sales, increased by 0.2% month-on-month, surpassing expectations of a 0.1% decline and maintaining the 3.2% growth seen in January.
BOE Governor Andrew Bailey has reiterated that rate cuts this year are within reason, stressing that all meetings are subject to consideration, with decisions made anew each time. He emphasized the importance of having confidence in the direction of wage growth and stated that waiting for inflation to drop to 2% before contemplating rate cuts is unnecessary. Bailey also expressed optimism about recent economic developments, viewing them as positive news.
On the other hand, the Euro faced downward pressure on the latest Purchasing Managers Index (PMI) survey by HCOB on Thursday revealing that the Eurozone Manufacturing PMI for March was 45.7, lower than the previous reading of 46.5, and below the consensus forecast of 47.0. However, the Services PMI improved to 51.1 in March from 50.2 in February, surpassing the estimated 50.5. The Eurozone PMI Composite rose to 49.9 in March, compared to the expected 49.7 and the previous reading of 46.3.
On Friday, the German Import Price Index (Month-on-Month) for January was reported as flat at 0.0%, contrary to the expected decline of 0.3% and the previous decline of 1.0%. The year-over-year figure indicated a decline of 5.9%, which was better than the expected decline of 7.4% and the previous decline of 7.0%.
EUR/GBP is trading up by almost three tenths of a percent on Thursday in the 0.8560s after the outcome of the Bank of England (BoE) meeting and overall weaker-than-expected British PMI data, weighed on the Pound Sterling (GBP) side of the pair.
The Bank of England left interest rates unchanged at 5.25% at its meeting on Thursday but the distribution of votes changed to show none of the officials voting for an interest rate hike. This was a change from the one who voted for a hike at the last meeting. Instead the majority of eight board members voted for no-change – one more than the previous meeting – and only one voted for a cut in interest rates, as before.
The Pound Sterling was hit by the lack of any BoE officials voting to raise interest rates, since higher interest rates are a positive factor for currencies because they attract greater inflows of foreign capital.
Both Eurozone and UK PMI data for March showed overall cracks in the outlook. In the case of the UK, the S&P Global/CIPS Composite PMI came out lower-than-expected at 52.9 when 53.1 had been forecast from 53.0 previously.
UK Services PMI undershot expectations of remaining at 53.8, dropping to 53.4. Manufacturing actually beat expectations at 49.9 when 47.8 had been forecast from 47.5 previous.
In the Eurozone, the HCOB Composite PMI rose to 49.9 thereby beating estimates of 49.7 and the previous February reading of 49.2.
Eurozone HCOB Manufacturing PMI in March fell to 45.7, declining deeper into contractionary territory (below 50) than had been predicted. Economists had estimated a more buoyant rise to 47.0 from 46.5 previously.
Euro area HCOB Services PMI rose to 51.1 in March, beating estimates of 50.5 from 50.2 previous, according to data from S&P Global.
Europe's economic powerhouse Germany, meanwhile, revealed a similar trend, with German HCOB Manufacturing PMI declining to 41.6 which was below estimates of 43.1 and February's 42.5. It too showed unexpected gains, however, in both Services component and the Composite number.
The EUR/GBP is currently experiencing mild gains, trading at 0.8541 after peaking at a high of 0.8560. Markets are digesting British inflation data from February and gearing up for the Bank of England’s (BoE) decision on Thursday. In the meantime, monetary policy divergences between the BoE and the European Central Bank (ECB) give the GBP an advantage over the EUR/p>
The UK saw a softening in February CPI figures, with headline inflation at 3.4% YoY compared to January's 4.0%, and core inflation at 4.5% YoY down from 5.1%. Despite expectations, these numbers were slightly lower, marking the lowest since September 2021 but still above the 2% target. With the Bank of England's decision imminent, a policy hold is anticipated. However, given persistently high services inflation at 6.1% YoY, the BOE may take time to loosen policy. Market expectations of a 25 bp rate cut in August followed by two more by year-end are fully priced in. On the other hand, the ECB easing cycle is seen starting in June, followed by cuts in September and October. Investors see some chances of an additional cut in December as well.
On the daily chart, the Relative Strength Index (RSI) for the EUR/GBP pair resides in negative territory, suggesting a slight bearish momentum. Despite brief transitions into positive territory, the RSI has reverted to negative levels in recent sessions, revealing that sellers maintain dominance. The green bars on the Moving Average Convergence Divergence (MACD) histogram reflect positive momentum, albeit flat, potentially indicating a weak presence of the bulls.
Regarding the overall trend, the pair is trading below its 20, 100, and 200-hour Simple Moving Averages, which gives arguments for a bearish outlook
The EUR/GBP cross attracts some buyers on Wednesday and jumps to a fresh daily peak, around the 0.8555-0.8560 region after the release of the UK consumer inflation figures. Spot prices, however, lack follow-through and remain confined in a familiar trading band held since the beginning of the current month.
The UK Office for National Statistics (ONS) reported that the headline CPI rose 0.6% in February vs. a 0.6% fall recorded in the previous month and consensus estimates. Meanwhile, the yearly rate decelerated more than expected, from 4.0% in January to 3.4% during the reported month – marking its lowest level since September 2021.
Adding to this, the Core CPI fall from the 5.1% YoY rate to 4.5% in February, also missing expectations. This comes on top of a technical recession in the UK during the fourth quarter and raises bets for an early rate cut by the Bank of England (BoE), which, in turn, undermines the British Pound (GBP) and provides a modest lift to the EUR/GBP cross.
The UK inflation, however, is still much above the BoE’s 2.0% target, which, in turn, helps limit losses for the GBP. The shared currency, on the other hand, remains depressed in the wake of expectations that the European Central Bank (ECB) may start cutting interest rates in June. This further contributes to capping gains for the EUR/GBP cross.
Moreover, traders seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of the BoE policy meeting on Thursday. Hence, it will be prudent to wait for a sustained breakout through the short-term trading range before positioning for an extension of the recent goodish rebound from the 0.8500 psychological mark.
The EUR/GBP pair jumps to 0.8550 in the European session on Tuesday. The asset rises ahead of key United Kingdom economic events this week. The Pound Sterling will be influenced by the Bank of England’s (BoE) interest rate decision, which will be announced on Thursday.
The BoE is widely anticipated to keep interest rates unchanged at 5.25% as inflation is far from the desired rate of 2%. Investors await fresh cues about when the BoE could begin reducing interest rates. Currently, market participants anticipate that the BoE will announce their first rate cut in the August policy meeting after maintaining a hawkish stance for more than two years.
BoE policymakers have been reiterating that rate cuts would be appropriate only if they are convinced that inflation will return sustainably to the desired target of 2%.
Before the BoE policy, investors will focus on the UK Consumer Price Index (CPI) data for February, which will be published on Wednesday. The annual headline inflation is forecast to have grown at a slower pace of 3.6% against 4.0% in January. In the same period, core inflation that excludes volatile food and energy prices is forecast to have decelerated to 4.6% from 5.1%.
Meanwhile, the Euro rises on upbeat Eurozone ZEW Survey—Economic Sentiment. The economic data showcases institutional investors' sentiment towards the economic outlook improving significantly to 33.5 from expectations of 25.4 and the former reading of 25.0.
Going forward, the Euro will be guided by market expectations for the European Central Bank's (ECB) rate cuts. Investors expect the ECB to start reducing interest rates by summer.
Economists at ING analyze Pound Sterling (GBP) outlook ahead of Thursday’s Bank of England (BoE) decision.
February’s CPI figures released on Wednesday could have a big say in what the BoE announces on Thursday. The focus will remain on services inflation, which we expect to decelerate but remain elevated at 6% (also in line with the Bank’s forecasts).
After dropping its hawkish tone in February, we don’t see the Bank being in any rush to take further steps to the dovish side of the spectrum just yet, at least barring a major downward surprise in CPI on Wednesday.
Ultimately, the Pound may absorb any further recovery in the Dollar better than most other currencies, and we see EUR/GBP stabilising around the 0.8500 or trading closer to the big 0.8500 support in the short term.
EUR/GBP advances for a second consecutive session, trading higher around 0.8550 during the Asian session on Monday. The Consumer Inflation Expectations, released by the Bank of England (BoE) on Friday, increased by 3.0%, although slightly lower than the previous uptick of 3.3%.
The softer inflation data has spurred speculation in markets about a potential Bank of England (BoE) rate cut in June, which could weaken the Pound Sterling (GBP) and provide support for the EUR/GBP cross.
Moreover, the Rightmove House Price Index (MoM) for March surged by 1.5% on Monday, exceeding the previous increase of 0.9%. Additionally, the annual report showed a rise of 0.8% compared to the previous 0.1%.
However, the European Central Bank (ECB) maintained borrowing costs at record highs during its March meeting, though policymakers hinted at discussions regarding a potential rate cut. This dovish stance from ECB officials could present additional challenges for the Euro. François Villeroy de Galhau, an ECB policymaker, suggested the likelihood of a rate cut in the spring.
Furthermore, ECB policymaker Pablo Hernandez de Cos stated on Sunday that the central bank opted to keep borrowing costs at record highs this month. He also indicated that the central bank might commence interest rate cuts in June following a decrease in Eurozone inflation.
On Monday, market attention will be on the Eurozone Harmonized Index of Consumer Prices (HICP) and Trade Balance. Looking ahead to Tuesday, traders will closely monitor various market indicators from the United Kingdom (UK), including the Consumer Price Index, Producer Price Index, and Retail Price Index.
The Bank of England will release its Inflation Attitudes Survey on Friday. Economists at ING analyze Pound Sterling’s (GBP) outlook.
Barring major surprises today, we think EUR/GBP will struggle to find direction into the CPI and BoE events next week.
Recent price action showed that levels close to 0.8500 are stretched to the downside, and the relatively unchanged short-term rate differential does not argue for any break lower.
When we look at the Sonia curve, however, 62 bps of easing by year-end still probably looks too conservative: our economist’s call is for 100 bps, leaving a considerable gap to be covered on the dovish side and giving us reasons to think we’ll see a higher EUR/GBP by year-end.
The EUR/GBP pair bounces back strongly from 0.8530 in the European session on Friday. The cross rebounds even though market participants anticipate that the Bank of England (BoE) will start reducing interest rates after the European Central Bank (ECB).
Market expectations for the ECB reducing interest rates are leaned towards the June policy meeting. Several ECB policymakers are also favoring a rate cut decision in June as the inflationary pressures in the Eurozone economy have come down significantly. The core inflation decelerated to 3.1% in February, and there are no signs of a significant improvement in the economic outlook, which will keep price pressures limited.
On Thursday, ECB Governing Council member Klaas Knot said he believes the central bank will start cutting interest rates in June. Separately, ECB Governing Council member Yannis Stournaras backed the case for an early rate cut. Stournaras added that he doesn't buy the argument that the ECB cannot cut rates before the Fed and that four rate cuts in 2024 seem reasonable.
Meanwhile, the Pound Sterling has come slightly under pressure as investors shift focus to the BoE’s interest rate decision, which will be announced on Thursday. The BoE is expected to keep interest rates unchanged at 5.25%. But before that, the United Kingdom’s inflation data for February will be keenly watched.
The inflation data will influence market expectations for BoE rate cuts, which are currently leaning toward August for the first rate cut.
EUR/GBP has bounced off 0.8500, again. Economists at Société Générale analyze the pair’s outlook.
Repeated attempts by EUR/GBP to break below 0.8500 have failed this year, with the Pound finding support from higher BoE interest rates and the market’s expectation that the UK may cut rates by slightly less than the ECB this year.
With both economies stagnating, the strongest argument for the UK to cut by more is that higher rates give more room to act when inflation is deemed low enough to do so.
We will continue to recommend buying EUR/GBP when it gets close to 0.8500, and GBP, along with CHF, will be a favourite European currency short.
EUR/GBP continued to climb steadily higher on Wednesday to settle around the 0.8550 mark. Economists at ING analyze the pair’s outlook.
Today is a quiet one in the UK. The MPC is in the quiet period ahead of next Thursday’s announcement, and the data calendar is empty. On Friday, we’ll see one of the two final data inputs ahead of the BoE’s meeting – the Bank’s Inflation Attitudes Survey. The final data piece is the February CPI figures, which are released one day before the BoE announcement.
EUR/GBP is stabilising at around 0.8550, as per our expectations. We expect it to hover around these levels ahead of key data releases in the UK.
The EUR/GBP cross comes under heavy selling pressure on Thursday and for now, seems to have snapped a three-day winning streak to the 0.8560 area, or the weekly top touched the previous day. Spot prices drop to the 0.8535 region, or the fresh daily low during the first half of the European session and remain well within the striking distance of the monthly trough touched earlier this week.
The shared currency meets with some supply after European Central Bank (ECB) Governing Council member Yannis Stournaras backed the case for an early rate cut. Stournaras added that he doesn't buy the argument that the ECB cannot cut rates before the Fed and that four rate cuts in 2024 seem reasonable. This comes after several ECB officials floated the idea for the first rate cut in June and a further move in July, which, in turn, exerts pressure on the EUR/GBP cross.
The British Pound (GBP), on the other hand, remains well supported by expectations that the Bank of England (BoE) will keep interest rates higher for longer. The bets were reaffirmed by the monthly UK GDP print on Wednesday, which showed that the economy returned to growth in January after entering a shallow recession in the second half of 2023. This, in turn, is seen as another factor that contributes to the heavily offered tone surrounding the EUR/GBP cross.
Moving ahead, there isn't any relevant market-moving economic data due for release on Thursday, either from the Eurozone or the UK. Hence, investors will keep a close eye on comments from ECB policymakers, which will continue to influence the Euro and provide some impetus to the EUR/GBP cross. Apart from this, the top-tier US macro data might infuse some volatility in the markets and further contribute to producing short-term trading opportunities.
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