EUR/GBP ignores recent data dump – sideways trading continues

The EUR/GBP cross has been moving sideways for multiple months, showing no desire to start a meaningful trend. However, it traded slightly higher on Thursday as investors digested a recent data dump.

UK real estate sector deteriorates

The Office of National Statistics (ONS) reported that the annual pace of increase in UK home prices dwindled for a third month in a row in February.

The 12-month increase in the average UK house price was 5.5% in February, down from the upwardly adjusted 6.5% gain in January. However, the result was higher than expected increase of 5.1%.

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House prices have increased by £16,000 since February of last year, to an average of £288,000, but have since dropped by £5,000 from their latest peak in November.

The average UK home price declined by 1% in February, compared to a 0.6% drop in March (both figures are non-seasonally adjusted), and by 0.3% when corrected for seasonality. Annual price increases varied widely by region, with London showing the lowest at 2.9% and the highest price growth of 8.6% in the West Midlands.

UK inflation surprises to the upside

More data showed that the UK consumer price index (CPI) grew 10.1% year over year in March, which is lower than the 10.4% gain seen in February but still higher than the 9.8% increase predicted by analysts. For the eighth month running, annualized headline CPI stayed over 10%.

Monthly core CPI growth slowed to 0.8% in March from 1.1% in February, with significant contributions from cheaper motor fuels and heating oil. Nevertheless, the core consumer price index reached 6.2%, also above the 6.0% forecast.

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This strengthens the case for another rate rise of 25 basis points (bps) from the Bank of England (BoE) since tighter monetary policy is needed to rein in enormous inflation.

EU inflation slows notably, but core increases further

Inflation in the Eurozone dropped substantially in March, falling to 6.9% from 8.5% on lower energy costs. However, the European Central Bank has concerns since core inflation, which excludes energy, food, alcohol, and tobacco, increased by 0.1% to 5.7%.

The argument for another rate increase by the European Central Bank (ECB) remains strong despite the persistent decline in Eurozone inflation. However, Christine Lagarde, the European Central Bank president, is widely expected to slow the rate hikes to 25 basis points.

Meanwhile, Eurostat reported that construction output rose 2.3% in the eurozone in February and 2.0% in the European Union when adjusted for seasonal factors.

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Although output in the sector expanded in February, it grew slower than in January, when it increased by a downwardly revised 3.8% in the eurozone and by 3.3% in the 27-member bloc. Construction production increased by 2.3% in the eurozone and 2.1% in the EU from the previous year.

Later today, President Christine Lagarde of the European Central Bank will give a speech, and the ECB will publish the minutes from its most recent policy meeting.

There is not much to analyze in the chart as the price has stayed the same since November, with the solid resistance at 0.8860 and the support zone below 0.8750.