EUR/GBP: Momentum Tilts Positively Amidst ECB Uncertainty
Introduction
The EUR/GBP currency pair has demonstrated a moderate upward trend in Friday's trading session, currently trading around 0.8560. This movement coincides with the release of the Eurozone's Harmonized Index of Consumer Prices (HICP) for February, which exceeded expectations. The market's attention now shifts towards the European Central Bank's (ECB) decision next week.
Inflation Data and ECB Expectations
The February inflation data for the Eurozone painted a mixed picture. The headline inflation rate rose to 2.6% year-over-year, surpassing the anticipated 2.5%. However, this was still lower than the 2.8% recorded in January. The core inflation rate also exceeded forecasts, coming in at 3.1% year-over-year, marginally lower than the 3.3% reported in January.
These figures indicate that while inflation is gradually declining, the pace has been inconsistent. Markets anticipate a hold from the ECB next week, while the probability of a cut in April remains low at around 25%. In contrast, the Bank of England's first interest rate cut is now projected for August, giving the Pound a potential advantage.
EUR/GBP Technical Analysis
Short-term Momentum
The Relative Strength Index (RSI) has hovered around the neutral zone in recent sessions, indicating a balance between buyers and sellers. The slight increase over the past few days suggests a developing positive momentum for EUR/GBP.
Intermediate-term Trend
The Moving Average Convergence Divergence (MACD) histogram's flat green bars reveal a pause in the pair's bullish momentum. This suggests indecision in the market, supported by low volatility and the market's reluctance to commit to a clear direction.
Long-term Trend
The pair remains above the 20-day Simple Moving Average (SMA), but below the 100-day and 200-day SMAs. This indicates that bears have a moderate grip on the longer timeframe, while bulls maintain control in the shorter timeframe.
Conclusion
The EUR/GBP currency pair is navigating a period of uncertainty as the market awaits the ECB's decision next week. While inflation data has shown some resilience, the pace of decline remains uneven.
From a technical perspective, the pair is exhibiting signs of potential positive momentum in the short term. However, indecision and low volatility persist, hindering a clear directional bias. The long-term trend remains uncertain, with both bulls and bears holding a cautious stance.