The EUR/GBP pair has been under pressure, renewing its intraday low and experiencing a second consecutive day of decline. This downward movement is influenced by sluggish trading conditions and is not being swayed by hawkish comments from European Central Bank (ECB) officials or pessimism in the UK.
German Industrial Production (IP) showed improvement on a month-on-month (MoM) basis, growing by 0.3%, which exceeded market forecasts of 0.6%. However, on a year-on-year (YoY) basis, the growth figures eased to 1.6% from the previous reading of 2.3% (revised) and fell short of the expected 1.2%.
In contrast to the positive German data, ECB Governing Council member Isabelle Schnabel reassured markets by stating that the impact of the ECB’s tighter monetary policy on inflation is expected to peak in 2024. Despite these comments, the EUR/GBP pair remains under pressure.
The Euro has been weighed down by downbeat readings of German Factory Orders and Eurozone Retail Sales, as well as easing inflation expectations in the Eurozone. Additionally, concerns about the UK economy facing high inflation and lower productivity have contributed to the downward pressure on EUR/GBP.
Looking ahead, with a light economic calendar, traders will likely focus on UK Prime Minister Rishi Sunak’s visit to the US and political developments in the UK for further guidance. The outcome of Sunak’s trip to Washington D.C. and his discussions on deepening economic ties between the UK and the US could influence market sentiment.
In summary, the EUR/GBP pair is likely to remain under bearish pressure as recent Eurozone data supports ECB hawks while higher British inflation continues to suggest potential rate hikes by the Bank of England (BoE).
From a technical analysis perspective, if EUR/GBP fails to break above the previous support line around 0.8635, the pair could be further driven down towards the yearly low near 0.8565, which was reached in the last week