The Euro (EUR) was unable to maintain its earlier gains against the Pound Sterling (GBP), with the EUR/GBP pair slipping toward 0.8550 on Tuesday. This decline occurred despite a stronger-than-expected German ZEW Economic Sentiment index, which rose to 34.2 in August, surpassing both the 30.0 forecast and July’s 26.3 reading. The Eurozone sentiment gauge also improved more than anticipated, but these positive data points failed to generate significant upward momentum for the Euro, as reflected in the muted reaction in EUR/USD and the lack of sustained bids in EUR/GBP [1].
Earlier in the session, the Pound had come under pressure following a soft UK labor report for the three months to June. The ILO Unemployment Rate remained at 4.9%, higher than the 4.8% forecast, and employment growth slowed. According to analysts at ING, these figures indicate a cooling jobs market with minimal wage pressure, suggesting 'little impetus for the Bank of England (BoE) to hike rates this year.' Despite this, Sterling stabilized during the European session, leading to a drift lower in the EUR/GBP cross [1].
Market participants are now focused on the upcoming UK Consumer Price Index (CPI) data for July, scheduled for release on Wednesday. The consensus expectation is for a 2.9% year-over-year increase, up from 2.6% previously. A higher-than-expected CPI print could revive BoE rate hike bets and add further pressure on EUR/GBP, while a softer reading may leave the Pound vulnerable and potentially allow the Euro to recover some ground [1].
From a technical perspective, EUR/GBP is trading at 0.8551, just below a cluster of resistance levels, including the 100-period Simple Moving Average (SMA) at 0.8558 and horizontal barriers at 0.8553 and 0.8559. The Relative Strength Index (14) is around 51, indicating neutral-to-slightly positive momentum, but not enough to overcome the prevailing resistance. Immediate support is seen at 0.8551 and the 20-period SMA at 0.8549, with a sustained move below these levels potentially leading to a deeper pullback [1].
CONCLUSION
Despite positive German sentiment data, the Euro failed to hold gains against the Pound, as the market awaits key UK inflation figures. The outcome of the upcoming CPI release is likely to determine the next direction for EUR/GBP, with technical indicators suggesting limited upside in the near term.