EUR/GBP reverses from three-week high towards 0.8650 on upbeat UK GDP, dovish ECB concerns
- EUR/GBP takes offers to refresh intraday low after initially renewing a three-week high.
- Preliminary readings of UK Q2 GDP came in better than expected on QoQ, monthly GDP also rose for June.
- ECB’s monthly Economic Bulletin cites heavy uncertainty, Reuters poll suggest policy pivot in September.
- Risk catalysts will be crucial to watch for clear directions.
EUR/GBP drops more than 15 pips as it renews intraday low near 0.8650 after an upbeat UK growth numbers published early Friday morning in London. Adding strength to the bearish bias could be the fears of the European Central Bank’s (ECB) policy pivot in September, as well as downbeat ECB report.
As per the preliminary readings of the UK’s second quarter (Q2) Gross Domestic Product (GDP), the British economy grew 0.2% QoQ versus 0.1% prior and 0.0% expected while the monthly GDP also rose by 0.5% MoM in June compared to -0.1% previous readings and 0.2% forecasts.
Elsewhere, the European Central Bank’s (ECB) monthly Economic Bulletin unveiled a highly uncertain outlook for the bloc’s economic growth and inflation. The publication also mentioned the continuous decline in the “too high inflation”, as well as deterioration in the near-term economic outlook.
Earlier in the day, latest Reuters poll about the European Central Bank (ECB) cites the market’s mixed concerns as a slim majority expects a pause to the rate hike trajectory in September but the hot inflation also pushes some economists to expect a rate increase by the year-end. The same also exerts downside pressure on the EUR/GBP pair.
It’s worth noting that the early week forecasts of the the UK’s leading thinktank National Institute of Economic and Social Research (NIESR) signalled higher rates and bolstered hawkish bias about the Bank of England (BoE), which in turn weigh on the EUR/GBP price.
Having witnessed the initial market reaction to the UK Q2 GDP data, the EUR/GBP pair traders should look for risk catalysts for clear directions as the economic calendar remains mostly empty for the Eurozone. Even so, recent doubts about the ECB’s future rate hikes may prod the cross-currency pair’s immediate upside.
Technical analysis
EUR/GBP bulls need a daily closing beyond the 100-DMA hurdle surrounding 0.8670 to keep the reins while a pullback move remains elusive beyond the previous resistance line stretched from late April, close to 0.8650 at the latest.