The EURGBP currency pair has tumbled due to expectations of a 25 bps rate hike by the Bank of England. This increase is prompted by robust earnings and high inflation figures that continue to plague the nation. Additionally, Retail Sales in the UK fell more than expected. This setback has been partially attributed to the dismal weather that plagued the month of July, with persistent heavy rainfall discouraging consumer activity.  

While dampened weather conditions impacted clothing sales, the downward trajectory of food sales is particularly significant as the enduring impact of the cost of living continues to reverberate among consumers. Given that markets have already incorporated the likelihood of another rate hike by the Bank of England in September, additional challenges loom for consumers, potentially necessitating further budgetary constraints.  

Technical 

Since the 50-day moving average fell below the 100-day moving average, a downward trend commenced on the 4H Chart. Bullish momentum reattempted an upward trend, but the EURGBP currency pair was met with resistance at the 100-day moving average.  

The currency pair may succumb to lower support levels since a breakout from the rising wedge encouraged a pullback and established support at 0.85227 due to an increase in selling volume. However, the price action fell below the 50-day moving average at the 0.85879 level, which may encourage a leg down towards the 0.85053 major support.  

However, the price action has since flattened at the 0.85227 support, which may bolster the currency pair towards the 0.85879 resistance at the 23.60% Fibonacci level, with a move above the 50-day moving average having the potential to reaffirm an uptrend.  

Summary 

The EURGBP currency pair has succumbed to further downside pressure since a hawkish BoE broke out of the rising wedge and established support at 0.85227. If the downward trend persists, the currency pair may be encouraged to retest the 0.85053 major support. However, the 0.85879 resistance may be a pivot point for an uptrend if a reversal is attempted, where a movement above the 50-day moving average may further bolster upward momentum.  

Sources: TradingView, Reuters