EUR/GBP slides to 0.8505, posting 0.37% losses as sterling strengthens during Wednesday’s trading period.
Following the UK’s CPI, markets foresee diminishing odds for a BoE rate cut in June, bolstering the pound vs the euro.
The ECB is still considering a potential policy rate cut in June and divergences may favor the Pound.
The EUR/GBP traded lower falling to 0.8505 on Wednesday after the Pound garnered strength following the Office for National Statistics (ONS) releasing inflation data higher than the market’s expectations. This pushed down the odds of a June rate cut by the Bank of England (BoE), giving a boost to the sterling.
The Office for National Statistics (ONS) of the UK revealed that in April, the inflation rate dipped to 2.3% year-on-year from 3.2% in March, surpassing market expectations of 2.1%, while the core CPI, excluding volatile food and energy prices, rose to 3.9% against an expected 3.6%. As a reaction, forecasts for a Bank of England (BoE) rate cut in June declined sharply from 50% to 12% following the inflation announcement, and those hawkish bets seem to have benefited the Pound.
On the other hand, the European Central Bank (ECB) officials are confident that inflation is under control and are gearing up for a first cut in June. In that sense, in case the BoE and ECB diverge with the British bank delaying cuts, could lay the ground for further downside .
Examining the daily chart, the Relative Strength Index (RSI) indicates a negative trend, with its most recent value edging towards the oversold territory. Further supporting this bearish outlook is the Moving Average Convergence Divergence (MACD) as it illustrates rising red bars, revealing a rising negative momentum.
Looking at the broader market perspective, the EUR/GBP finds itself in a challenging position in relation to its Simple Moving Averages (SMA), hinting towards a potential further decline. Currently, the alignment is below the 20, 100, and 200-day SMAs. This traditionally suggests a bearish tilt, which is further reinforced by Wednesday’s downward movement.
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