EUR/GBP Edges Higher on Inflation Data, Eyes ECB and BoE Policy Shifts
EUR/GBP currently trades near 0.8560, showing modest gains following slightly hotter-than-expected Eurozone Harmonized Index of Consumer Prices (HICP) figures for February. Traders now focus on next week's European Central Bank (ECB) meeting for further guidance on monetary policy. February's Eurozone inflation data came in above forecasts. Headline inflation rose 2.6% year-over-year (vs. 2.5% expected), while core inflation printed at 3.1% (vs. 2.9% expected). These figures, though showing a gradual decline, suggest inflation remains a concern for the ECB.
Market expectations for the ECB's easing cycle appear centered on June, with a rate cut in April considered less likely. Meanwhile, expectations for the Bank of England's first cut have shifted to August, potentially giving the Pound a slight edge. Technical indicators offer a mixed picture. The Relative Strength Index (RSI), while recently showing slight bullish momentum, remains near neutral territory, reflecting a balance between buyers and sellers. The flat green bars on the Moving Average Convergence Divergence (MACD) histogram suggest a pause in the pair's upward momentum, further signaling market indecision. EUR/GBP's position above the 20-day Simple Moving Averages (SMAs), while below the 100 and 200-day SMAs, indicates that bears retain control of the longer timeframe, but bulls hold a short-term advantage.