- EUR/GBP remained depressed, well within the striking distance of multi-month lows set on Tuesday.
- Tuesday’s weaker Eurozone CPI turned out to be a key factor behind the euro’s underperformance.
- Investors now look forward BoE Governor Bailey’s testimony before placing fresh directional bets.
The EUR/GBP cross remained depressed below the 0.8900 mark through the early European session and last seen trading just a few pips above three-month lows set on Tuesday.
The EU´s Eurostat reported on Tuesday that the Eurozone consumer inflation fell in negative territory for the first time since May 2016, with the headline CPI projected to fall to -0.2% in August. The data caught investors off guard, which, in turn, was seen as one of the key factors behind the shared currency’s relative underperformance against its British counterpart.
Meanwhile, the US dollar built on the previous day’s late rebound from more than two years and prompted some follow-through long-unwinding trade around the GBP/USD major. This coupled with concerns about the lack of progress in Brexit talks might extend some support to the EUR/GBP cross and help limit any deeper losses amid absent relevant economic releases.
Investors also seemed reluctant to place any aggressive bets ahead of the BoE Governor Andrew Bailey’s testimony before the Treasury Select Committee. Investors will look for fresh clues about the possibility of negative interest rates, which will play a key role in influencing the near-term GBP price dynamics and help determine the EUR/GBP pair’s near-term trajectory.
From a technical perspective, technical indicators on 4-hourly/daily charts remain on the verge of breaking into the bearish territory and further warrant some caution for bearish traders. That said, the EUR/GBP cross still seems vulnerable to extend the downfall further towards testing June monthly swing lows support near the 0.8865 region.
Technical levels to watch
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