Euro Weakens on Soft Inflation Data While Pound Awaits BoE Decision

Key Takeaways:

*The euro lost ground after the Eurozone CPI was released and failed to meet market expectations. 

*The BoE’s rate decision is due today; Pound Sterling expects higher volatility.

Market Summary:

The euro lost ground in the previous session following the release of softer-than-expected Eurozone CPI figures, which came in at 1.9% versus the prior 2.2% reading. This cooling inflation has raised market speculation that the ECB may consider additional monetary policy easing to support regional economic growth. However, the single currency has demonstrated underlying resilience, supported by overall stable economic indicators that have helped maintain its strength against major peers.

Across the Channel, the British pound initially found support from stronger UK inflation data but remains vulnerable to broader economic concerns. Despite the positive CPI surprise, lingering weak economic indicators continue to fuel expectations of a dovish tilt from the Bank of England. This sentiment has kept sterling under pressure in recent trading sessions.

All eyes now turn to today’s BoE rate decision and accompanying meeting minutes, which will provide crucial insights into the central bank’s policy trajectory. Market participants will scrutinize the statement for clues about potential rate cuts and their timing, with the outcome likely to determine near-term direction for the pound. The decision comes at a delicate juncture, balancing inflation concerns against signs of economic softening.

Technical Analysis 

EURGBP, H4

The EUR/GBP pair continues to consolidate near recent highs, exhibiting limited volatility as counterbalancing strength in both currencies has resulted in rangebound trading. The technical picture remains constructive, with the pair comfortably positioned within its ascending trend channel – a pattern that continues to favor buyers.

Current indicator readings suggest maintained bullish momentum, with the RSI hovering near overbought levels and the MACD holding firmly in positive territory. This technical configuration increases the significance of the 0.8560 resistance level, as a confirmed breakout above this barrier would likely trigger fresh buying interest and potentially propel the pair to new highs.

While the prevailing trend remains upward, traders should remain alert to potential exhaustion signals, particularly if the pair fails to conquer resistance after multiple tests. The coming sessions should provide clarity on whether the current consolidation represents a pause before another leg higher or the formation of a more substantial resistance level.

Resistance levels: 0.8650, 0.8717

Support levels: 0.8490, 0.8420