- EUR/GBP continued with its struggle to make it through the 0.8525-0.8530 resistance zone.
- Resurgent USD demand weighed on the shared currency and exerted downward pressure.
- Hotter-than-expected Eurozone consumer inflation figures failed to impress bullish traders.
The EUR/GBP cross witnessed an intraday turnaround from the 0.8525-0.8530 supply zone on Tuesday and dropped to a fresh daily low during the first half of the European session. The cross remained on the defensive near the 0.8500 psychological mark and moved little following the release of preliminary Eurozone consumer inflation figures.
According to the data published by Eurostat, the annualized Eurozone Harmonised Index of Consumer Prices (HICP) jumped 8.1% in May as against expectations for a rise to 7.7% from 7.4% previous. The core figures arrived at 3.8% YoY in May, beating consensus estimates for a steady reading of 3.5% booked in April. This comes a day after Germany's annual inflation hit a record high level of 8.7% in May, making a compelling case for aggressive rate hikes by the European Central Bank.
The data, however, failed to impress the euro bulls amid resurgent US dollar demand. Apart from this, slightly less hawkish comments by Governing Council member Ignazio Visco, saying that rate hikes will have to be gradual given economic uncertainties, did little to lend any support to the EUR/GBP cross. That said, the downside seems cushioned, at least for the time being, amid the UK-EU impasse over the Northern Ireland protocol, which might continue to act as a headwind for the British pound.
Even from a technical perspective, the EUR/GBP cross has been oscillating in a familiar trading range over the past four trading sessions. This further makes it prudent to wait for strong follow-through selling before traders start positioning for any meaningful downside. On the flip side, sustained strength beyond the 0.8525-0.8530 region would set the stage for a move towards last week's swing high, around the 0.8585 zone, en-route the YTD peak, near the 0.8620 region touched on May 12.
