The Euro (EUR) stabilized against the Pound Sterling (GBP) on Wednesday, with the EUR/GBP pair trading flat near the 0.8540 level after two consecutive declines. Earlier in the day, the Pound reached a two-week high before retracing, following the release of the German Consumer Price Index (CPI), which indicated that inflation remained persistent in July [1].
Despite the Pound's firm undertone throughout the week, the EUR/GBP pair remained below its starting level as traders awaited the upcoming UK GDP report, which could potentially challenge Sterling's recent strength. The Bank of England (BoE) recently kept its key interest rate unchanged at 3.75% during its early-July meeting, a decision that matched market expectations. However, the vote was split, with three out of nine Monetary Policy Committee (MPC) members advocating for a 25 basis-point hike due to concerns about inflation risks, particularly those linked to higher energy prices stemming from the Middle East conflict [1].
The preliminary UK GDP data, scheduled for release on Thursday, is expected to be the main catalyst for the EUR/GBP cross. Economists forecast a 0.4% quarter-on-quarter growth for the three months to June, down from 0.6% in the first quarter, while the annual growth rate is anticipated to rise to 1.1% from 0.9% in March. According to analysts, a GDP figure in line with these forecasts is unlikely to significantly impact Sterling, but a notable miss could trigger a sharp market reaction [1].
From a technical perspective, EUR/GBP remains bearish in the near term, trading below both the 20-period Simple Moving Average (SMA) at 0.8551 and the 100-period SMA at 0.8554. The pair faces resistance at 0.8541 and 0.8545, while support is found at 0.8534 and 0.8532. The Relative Strength Index (RSI) is around 39, below the neutral 50 mark, indicating subdued bullish momentum and a bias toward further downside as long as resistance levels hold [1].
CONCLUSION
The EUR/GBP pair is trading in a narrow range as markets await the UK GDP release, with technical indicators suggesting a bearish bias. Unless the GDP data surprises, significant moves in Sterling are unlikely, but a miss could prompt volatility.