EUR/GBP rises on disappointing UK inflation data

• EUR/GBP rose to 0.8580, breaking a key resistance level.
• Weaker UK inflation data weighed on the pound during Wednesday’s session.
• Markets are strongly considering a rate cut in September by the BoE.

On Wednesday, EUR/GBP rose towards 0.8580, with weaker than expected inflation data from the UK weighing on the pound. This contrasts with moves on Tuesday, when sterling’s strength was boosted by more positive UK employment data as lower inflation figures could prompt a more accommodative Bank of England (BoE).

Britain’s Office for National Statistics reported that UK inflation, as measured by the Consumer Price Index (CPI), rose to an annual 2.2% in July from 2% in June, below market expectations of 2.3 %. Similarly, core CPI growth eased to 3.3% from 3.5% in June. The initial market reaction to these figures saw interest in the pound decline.

The BoE’s next policy meeting is on September 19, and the market is currently pricing in a nearly 45% chance of a rate cut.

Technical analysis EUR/GBP

EUR/GBP has shown an overall bullish trend in recent sessions. The EUR/GBP Relative Strength Index (RSI) is hovering around the averages, indicating that the bulls are gathering strength and have some way to go. The highest RSI was around 62, suggesting a slight presence of overbought. Moving Average Convergence Divergence (MACD) shows constant green bars, confirming the presence of buyers.

EUR/GBP daily chart