Is EUR/GBP Breaching the Downtrend?

EUR/GBP is making a bullish reversal as inflation surges further in Europe in March

Skerdian Meta•Thursday, March 31, 2022•2 min read

EUR/GBP has been bearish since September 2020, reversing from around 0.95 to 0.82, with the 200 SMA (purple) acting as resistance during this time. The Euro has been quite weak during this time, but it has been showing strength in the last several days, making some decent gains.

During the downtrend, the 200 SMA (purple) has been the ultimate resistance although this pair has peaked its head above it a couple of times before. But, the decline has resumed again and sellers have continued to push lower. This time though the situation might be different. Inflation is surging in Europe, especially this month as energy, gas, petrol and food prices increased due to the conflict in Ukraine. This should force the European Central Bank (ECB) to start hiking interest rates, which would be positive for the Euro.

Consumer Price Index (CPI) inflation rose to 5.9% last month, but yesterday’s figures from Spain and Germany showed them surging further. Today the Italian and French CPI inflation figures confirmed just that, so the March CPI number for the Eurozone should jump as well when it gets released on Friday. This should help keep EUR/GBP bullish.

EUR/GBP Daily Chart – Buyers Push Above the 200 SMA

EUR/GBP is making a bullish reversal on the daily timeframe

March preliminary HICP +5.1% vs +4.8% y/y expected
February HICP was +4.2%
March CPI +4.5% vs +4.3% y/y expected
february CPI was +3.6%

The jump in French consumer inflation isn’t as dramatic as the Spanish and German readings yesterday but this is still a sizable leap. The headline reading is the highest since the latest methodology was introduced in calculating inflation since 1997. The high inflation here continues to bode ill for the euro area economic outlook as consumers are going to be feeling the pinch even more so than they already have in recent weeks/months.

The breakdown:

France CPI 03-2022

EUR/GBP Live Chart

EUR/GBP

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ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.