EUR/GBP Facing the 50 Daily SMA, After Being Rejected at the 200 SMA
The GBP began last week trading on a solid footing, buoyed by an upwardly revised UK manufacturing PMI, while the Euro continued to remain soft overall, which we also saw yesterday. In response to some softer Eurozone retail sales numbers and dovish comments from ECB members yesterday who confirmed once again that the ECB is down with rate hikes, the Euro remained weak against the GBP.
The GBP on the other hand grabbed new bids on Wednesday last week in reaction to the UK’s latest services PMI. The index was revised higher from 47.2 points to 49.3 in September’s final report. While the sector remained in contraction, the prognosis for the UK economy was significantly less bleak which is positive for the Pound. However, the GBP was unable to extend its gains into the second half of the session. The Euro benefited from the USD’s weakness.
As a result, EUR/GBP pair has been under pressure for the last week after the Eurozone’s consumer expenditure statistics slowed down at a faster rate in August as rising inflation squeezes families’ real income. The cross is projected to fall further as investor confidence in the Eurozone economy dwindles owing to an unclear economic outlook.
Investors are concerned about the economy’s prospects as the European Central Bank (ECB) raises interest rates, causing demand to decline and manufacturing activity to decrease. Yesterday the Eurozone Sentix Investors Confidence for October fell to -21.9 points from -21.5 before.
So, the negative data keeps accumulating for the Euro and this pair failed to push above the 200 SMA (purple) last week after being slightly bullish in September. Now, after the rejection at that moving average, EUR/GBP has reversed back down and is facing the 50 SMA (yellow) on the daily chart. Later on Thursday the UK GDP report is expected to show a return to growth in August after the 0.5% contraction in July which would be welcomed by GBP buyers, but there’s s time until then so let’s see.
EUR/GBP Live Chart
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