The EURGBP currency pair has been trading rangebound as further hawkishness from both central banks has been priced in ahead of the UK CPI release on Wednesday. With multiple ECB speakers taking the stand over the course of the next two days, any hawkish tilt is unlikely to move the currency pair, as the expectations for hawkishness are firmly priced in, leaving the Pound vulnerable to any downside surprises in tomorrow’s inflation print.  

On Tuesday, both economies reported PMI statistics, with the Eurozone Services PMI slowing down slightly from the prior period, expanding somewhat more than expected with a 55.9 print against the previous 56.2, with a 55.6 expectation. The services PMI showed signs of slowing down, at 44.6 to the prior 45.8, with a 46.2 expectation. In the UK, manufacturing PMI came in at 46.9, with expectations for 48 to the last 47.8. At the same time, the services PMI of 55.1 was lower than the 55.5 expectation from the previous 55.9, signalling a slowdown in the UK private sector. 

Technical 

The 1D chart shows the descending consolidation for the currency pair as it continues trading in a range between £0.8675 and £0.8717. The daily pivot point at £0.8691 supports the bulls looking to retrace from the mid-May bottom. This range could likely hold until the UK inflation data is released.  

If there is an upside surprise on the inflation print, downside pressure on the currency pair is possible, where the mid-May bottom at £0.8675 could come back into play before a test of the channel support at £0.8651. However, the downside reaction could be muted with a certain extent of hawkishness from the Bank of England already priced in. 

Alternatively, a soft inflation print could weaken the Pound significantly if the market reprices its interest rate expectations, which could entice the bulls to move through the 23.6% Fibonacci retracement toward £0.8744, the 38.2% Fibonacci retracement. From there, the Fibonacci midpoint and golden ratio at £0.8765 and £0.8786 stand in the way of a test of the channel resistance, where a breakthrough could lead the bulls to £0.8821. 

Summary 

The EURGBP currency pair continues to trade in a tight range and is likely to continue doing so until the UK inflation data becomes available on Wednesday, where a softer print could entice a more prominent market reaction than a stubborn inflation number would.  

Source: Koyfin, Tradingview, Reuters