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EUR/GBP forecast: forex signal ahead of UK data dump

By: Invezz

The EUR/GBP exchange rate was in a tight range on Monday as the market braced for a series of US and UK economic numbers. The pair was trading at the crucial support at 0.8500, a few points above last year’s low of 0.8500. 

UK inflation and European GDP data

The EUR to GBP pair has consolidated ahead of the latest UK jobs, inflation, GDP, and retail sales numbers. These numbers will provide more color about the health of the British economy. On Monday, a report by the Bank of England (BoE) showed that mortgage rates have dropped in the past six months as hopes that the BoE will start cutting interest rates eise.

The first report will come out on Tuesday when the Office of National Statistics (ONS) will release the latest jobs numbers. Economists expect the data to show that the UK unemployment rate dropped to 4.0% in December as the average earnings with bonus rose by 5.6%.

The other key data will be the country’s inflation report on Wednesday. Like other countries, the UK is still going through a stubbornly high inflation environment. Economists expect the data to show that the headline inflation dropped by 0.1% in January, leading to a YoY increase of 4.1%, higher than the BoE target of 2.0%.

Core inflation is expected to come in at 5.2%, an increase from the previous 5.1%. The other crucial report will be the upcoming UK GDP report on Friday. Economists expect the report to show that the economy contracted by 0.1% on a MoM and YoY basis in the last quarter. 

Finally, the ONS will release the latest retail sales numbers on Friday. Sales have been relatively strong in the past few months even as the UK has gone through a cost of living crisis. 

This data dump will provide more colour about the UK economy and what to expect from the Bank of England. Most economists expect a series of rate cuts in the second half of the year. 

EUR/GBP technical analysis EUR/GBP

EUR/GBP chart by TradingView

The EUR to GBP exchange rate has been in a tight range in the past few weeks. It has retreated from last November’s high of 0.8768 to 0.8550. The pair is approaching the key support level at 0.8500, its lowest point since September. 

It has remained below the 50-day and 25-day moving averages and formed a bearish flag pattern. The pair has also formed an inverted cup and handle pattern, a popular sign of a bearish continuation. Therefore, the pair will likely have a bearish breakout in the near term. If this happens, the next key support to watch will be at 0.8500 followed by 0.8450.

The post EUR/GBP forecast: forex signal ahead of UK data dump appeared first on Invezz

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