EURGBP moved to test resistance yesterday and the pair is now looking to breakout higher. The euro will have to shrug off higher U.K. inflation to see further gains.
Inflation in the U.K. quickened in last month after the culmination of the government’s subsidised meal program, whilst demand for second-hand cars also added support for higher prices. The headline rate came in at 0.5% in September, which was 0.1% lower than expectations, but it was higher than the 0.2% seen in August.
The 0.5% inflation number was also higher than the Bank of England prediction for 0.3% and it could have some bearing on the bank’s discussions over negative interest rates. The BoE have already discussed a sub-zero rate policy, with Governor Andrew Bailey saying they work best in the early stages of recovery. Higher inflation could make them pause on the idea, but a No Deal Brexit is still a threat and the policy could be used in that event.
Today sees speeches from ECB head Christine Lagarde and the BoEs Ramsden so there is some headline risk in the EURGBP pair. Brexit talks are still at a stalemate after the failure of last week’s EU summit and two-days of talks between David Frost, and his EU counterpart Michel Barnier, this week.
The EURGBP has tested the 0.91500 level again and the pair was unable to close above. This could be a boost for the pound but the trend still points higher. 0.9200-0.9280 are the key resistance zones now. A close below 0.9050 would be bearish. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
