- EUR/GBP has regained positive traction and is supported by a combination of factors.
- Mixed macro data in the UK led to speculation that the Bank of England would cut interest rates, causing the pound to fall.
- The rise in Germany's core CPI provides some support for the common currency and spot prices.
The EUR/GBP cross is attracting new buyers around the 0.8400 mark, and the sharp retracement decline from the previous day's high since August 23 has stalled. Announcement of UK macro indicators and final version of Germany's Consumer Price Index (CPI).
The UK's Office for National Statistics (ONS) reported that the economy returned to expansion in November, growing 0.1% after falling 0.1% in the previous month. Other UK data showed industrial and manufacturing production fell by a smaller than expected 0.4% and 0.3% in November, respectively. This comes on top of weak UK consumer inflation data released on Wednesday, giving the Bank of England (BoE) an opportunity to cut interest rates in February. Concerns about the UK's fiscal situation and the risk of stagflation, a combination of high inflation and slowing economic growth, are weighing on the value of the British pound (GBP).
Meanwhile, the common currency received some support from a rise in Germany's annual core inflation rate, which rose to 3.3% in December from 3.0% the previous month. This proved to be another factor continuing to support the bid for the EUR/GBP cross. But the statistics raised fears of stagflation for the euro zone's biggest economy and reaffirmed hopes for further interest rate cuts from the European Central Bank (ECB). This could put a stop to the euro's rise and warrants some caution for bullish traders in this currency pair, so it's best to wait for acceptance above the all-important 200-day SMA before placing new bets. That's wise.
economic indicators
Gross domestic product (month-on-month)
Gross domestic product (GDP) announced by the Cabinet Office national statistics A measure of the total value of all goods and services produced in the United Kingdom during a particular period, on a monthly and quarterly basis. GDP is considered the main indicator of economic activity in the UK. Month-over-month measurements compare economic activity in a base month to the previous month. Generally, an increase in this indicator is bullish for the British Pound Sterling (GBP), while a low value is considered bearish.
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