Sterling (GBP) and Euro (EUR) Price, Chart and Analysis:
- Eurozone GDP and Inflation slip lower, while German retail sales crater.
- Sterling continues the post-BOE rally.
EUR/GBP – Unable to Break Resistance, Tests Support
As the UK prepared to finally leave the UK at 23:00GMT today, the Brexit proxy, EUR/GBP, continues to slide lower and eyes levels last seen in mid-December. A comprehensive break and close below here would help to confirm a longer-term bearish outlook.
Euro-Zone data released earlier today showed growth of just 0.1% in Q4, missing both expectations and last quarter’s 0.2%. Core inflation in January also fell to 1.1% from a prior month’s 1.3%, while CPI nudged up 0.1% to 1.4%. In addition, French Q4 GDP slumped to 0.8%, missing expectations of 1.2% and a prior quarter 1.4%, while German retail sales for December cratered to -3.3% against expectations of -0.5% and a prior month’s 1.5%. The recent optimism that the Euro-Zone economy has stabilized looks unfounded on today’s numbers.
The British Pound on the other hand has preformed well in the last 24 hours after the Bank of England decided to leave all monetary policy settings unchanged. Going into the meeting a 0.25% rate cut was priced as a 50/50 call by the market, but MPC members decided a wait-and-see approach was justified. The meeting was also the last one chaired by governor Mark Carney who maybe felt that hiking rates and passing the baton to new governor Andrew Bailey – who starts his term on March 17 – was not the right course of action.
EUR/GBP has fallen heavily since mid-August from a high around 0.9325 to a current level of 0.8415. The sell-off had little respite until mid-December but the chart now suggests that another break lower could see sellers regain the upper hand. The low print at 0.8277 on December 12 is the next downside target and below here would see the pair look at the very low 0.8100s before 0.8000 ‘big figure’ support comes into play.
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EUR/GBP Daily Price Chart (August 2019 – January 31, 2020)
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