October 6, 2022 13:13:22
EUR/ GBP continues to harness the gains for the past three sessions. The pair recorded a jump of 138-pip from the key support level near 0.8630. The move is primarily sponsored by a fundamentally weak Great Britain pound. In recent developments, several economists are lowering their projections for UK economic growth.
UK economy could dwell into recession amidst hot inflation, but higher interest rates owing to global factors and not so liked ‘mini budget’ would augment the situation.
“The cost of living crisis would be worsened by a cost of borrowing crisis as warned by economists at Capital Economics.
Further, the sterling decline deepens against the US dollar and the Euro as the UK sovereign rating has been downgraded.
In addition, as per the Bank of England survey showed that British businesses’ expectations for inflation in one year rose to 9.5% last month, up from 8.4% in August.
These factors pressured the Cable against the major despite falling retail sales in Eurozone in August, signifying a weakness in consumer demand and a probable recession season. The data fell 0.3% month-on-month for a 2.0% YoY drop.
EUR/GBP consolidates near 0.8800
On the daily chart, the EUR/GBP pair has been trading in an upside momentum from the lows of 0.8379. The ascending trend line acts as a support for the bulls. However, the price breached the bearish trend line on October 3.
Further, the pair approached the trend line but remained pressured. A sustained move above 0.8790 would infuse more buying opportunities toward 0.8900.
Technical indicators:
RSI: The RSI (14) holds near 57. A reading above 50 would mean a positive bias.
50-day EMA: The price sits comfortably above the moving average.
In contrast, a daily close below 0.9700 would invalidate the bullish outlook.
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