The EUR/GBP cross failed to move in a volatile day on Wednesday, and it remained anchored to its 50-day moving average, changing hands at around 0.8545.
UK inflation roars higher
Traders paid attention to the UK inflation data, which came out higher than expected. The Office for National Statistics informed the year-on-year CPI inflation printed 3.2% in August, up from 2.0% in July and above analysts’ forecast of 2.9%. The monthly change surged to 0.7%.
The massive jump in inflation will force the governor of the Bank of England, Andrew Bailey, to write to the chancellor to explain why inflation has moved so much above the 2% target. Also, the Bank of England will need to hint at future steps to tame the soaring inflation.
Additionally, the core CPI indicator, which excludes food, alcohol, and energy prices, rose to 3.1% yearly, from 1.9% scored in July. The month-on-month change jumped to 0.7%. Since traders might start pricing in monetary policy tightening due to soaring inflation, inflation data supported the Pound, pushing EUR/GBP to daily lows near 0.8535.
From other news, the UK government introduced a new guide to learn to live with the virus . Plan A will use existing measures such as vaccines, self-isolation, and general guidance. Still, Boris Johnson said they were prepared to use actions in Plan B, including the introduction of vaccine passports, a return to legally required face masks in some settings, and potentially a return to work from home advice.
In Europe, the Eurostat showed that industrial production increased more than anticipated and printed 1.5% in July. The annual basis declined slightly, from 10.1% to 7.7%, but remains strong. The EUR/USD pair pushed higher after the data, helping the EUR/GBP cross to come off its daily lows.
Later in the day, Philip R. Lane, member of the Executive Board of the European Central Bank, speaks. His remarks often indicate the possible future direction of monetary policy, possibly influencing the euro today.
Daily chart remains choppy
The daily chart of EURGBP continues to show no desire for a meaningful trend as the price has been moving sideways since April. The price is trying to stay above the 50-day moving average, currently near 0.8540, with the next resistance spotted at the medium-term downtrend line at 0.8880.
Should the euro jump above the trend line, the following selling zone is spotted in the 0.89 – 0.8910 area, which has sent the cross lower several times already. Once the EUR/GBP cross closes above 0.8910 on a daily basis, the medium-term outlook could change to positive.
Alternatively, the support is seen at this week’s lows near 0.8510, and if not held, the price might drop toward the previous key demand zone at around 0.8470.