Euro and British Pound (EUR/GBP) Price, News, and Analysis:
- EUR/GBP slips further after better-than-forecast UK inflation data
- The Euro remains under pressure post-ECB Review.
Sterling opened the session on the front foot today after the latest UK inflation data beat market expectations, pushing inflation further above the central bank’s target. Slightly weaker-than-expected producer price readings tempered the overall outlook but the Bank of England will need to remain vigilant over increasing price pressures ahead of the August 5 MPC decision and Monetary Policy Report publication. Any hint of concern over inflation, or a nudge towards policy tightening, will see Sterling set course for recent highs.
I covered the latest ECB Review yesterday – see below – which suggested that any tightening in ECB monetary policy has now been pushed further down the line, leaving the Euro vulnerable to the downside against a range of other currencies. This will continue to weigh on EUR/GBP and will likely see multi-month lows probed in the near future.
EUR/GBP has been trading in a range for the last few weeks, drifting back towards support before moving higher. The series of lower highs within this range suggests that these pullbacks have weakened over the time, while yesterday’s break lower produced a new multi-month lower low, something that has been extended today. The pair are back below the 20-day sma, confirming a short-term negative sentiment, while the CCI indicator shows that EUR/GBP is deep in oversold territory. The pair may stabilize in the short term, to wash out this extreme weakness, but the downside is still favored with the April 5 low at 0.84725 the next target. Below here, EUR/GBP will be back at levels last seen in February 2020.
EUR/GBP Daily Price Chart (December 2020 – July 14, 2021)
IG Retail trader data show 73.64% of traders are net-long with the ratio of traders long to short at 2.79 to 1. The number of traders net-long is 0.13% higher than yesterday and 18.10% higher from last week, while the number of traders net-short is 3.26% higher than yesterday and 7.77% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/GBP trading bias.
What is your view on EUR/GBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.