Sterling outlook ahead of UK inflation report By Invezz

Sterling outlook ahead of UK inflation report By Invezz
Sterling outlook ahead of UK inflation report By Invezz

The Euro to GBP exchange rate ( ) drifted lower as traders focused on upcoming UK Consumer Price Index (CPI) data and possible rate cuts from the ECB and the BoE. It fell to a low of 0.8550 on Tuesday, down from this month’s high of 0.8645.

UK inflation data coming

The EUR/GBP pair fell as it became clear that the European Central Bank (ECB) and the Bank of England (BoE) would begin cutting interest rates, which stand at 4.35% and respectively. 5.25%.

Recent economic figures show that inflation in Europe has fallen sharply in recent months. Eurostat data showed that the bloc’s inflation fell to 2.4% in April as it moved closer to the ECB’s 2.0% target.

The UK will release the next UK CPI and PPI figures on Wednesday. Economists expect data to show the headline CPI fell from 3.2% in March to 2.1% in April. Some analysts estimate that this figure has fallen below 2.0% due to falling energy prices.

However, underlying inflation is expected to remain stubbornly high, falling from 4.2% to 3.6%. The PPI entry and exit figures are expected to be 0.4%.

Most economists believe that the two banks will make two rate cuts this year to boost their economies. Recent economic figures have revealed that both economies are doing quite well.

The UK emerged from a technical recession while European GDP grew 0.3% in the first quarter, reversing a 0.1% contraction the previous month.

It is therefore possible that the pound sterling will be stronger than the euro due to carry trade opportunities since rates in the UK will remain higher than in Europe.

EUR/GBP technical analysis

EUR/GBP chart by TradingView

The EUR/GBP exchange rate has fallen significantly in recent days. In this, it fell towards the lower side of the ascending channel. It also fell below the 50-day and 100-day exponential moving averages (EMA).

Additionally, the pair formed a head and shoulders pattern, a popular bearish sign, while the Relative Strength Index (RSI) and Stochastic Oscillator also pointed lower.

Therefore, the outlook for the pair is bearish, with the next level to watch being at 0.8500, its lowest point in March this year and July and August last year.

This article appeared first on Invezz.com France

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