EURGBP looking to press past 0.9100

  • EUR/GBP is up for the third consecutive day
  • The pair is resuming its main bull trend
  • Market is trading above its key moving averages
  • The target to the upside is located above and beyond 0.9000

Eurozone annual inflation rate was confirmed at 2.1% in July 2018, up from 2.0% in the previous month and the highest since December 2012. The main upward pressure came from energy and services, while food prices rose at a softer pace.

With the latter point in mind, Eurozone annual core inflation, which excludes the volatile prices of energy, food, alcohol and tobacco and at which the ECB looks in its policy decisions, was booked at 1.1% in July, above the previous month’s final reading of 0.9%.

This confirmation encouraged the Euro Sterling (EURGBP) exchange rate to push higher as shown in the small channel in the chart below.

EURGBP 3-Year 20-08-18

Source:, spotlight Ideas

The chart illustrates the decline of Sterling post the 2016 decision for the UK to leave the EU. However, for the past year the range has been quite stable with 0.8899 proving, until now to be a reliable resistance point. This still leaves Sterling 17.18% lower than it was before the referendum.

With inflation now above the European Central Bank’s (ECB) 2.0% target rate the odds of further policy tightening have risen. Therefore, it is no surprise to see renewed energy to lift the Euro ahead of the weekend, helping to reverse the weakness brought on by the Turkish financial crisis. So, the question now is where will the Euro move to next?

EURGBP Fibby Extension 20-08-18

Source:, spotlight Ideas

Our second chart shows that the targets one should be looking for are 0.9156 and depending on how the Brexit situation as well as the UK domestic political situation develops one could target 0.9430.

A note of caution

Of course, one must add a dash of caution as following the sad events in Genoa (Morandi Bridge) and the somewhat strident tone from Matteo Salvini (Deputy PM and Interior Minister) toward the EU one could see any Italian led fallout impacting the Euro.

The past week has fed back into a steady sell-off of 2-year Italian debt that exceeds a mild decline in the German 2-year. There is also some evidence that it was the 5 Star Movement that blocked expenditure on

(1) a tunnel to replace the bridge (2) maintenance of the bridge

A 5 Star website/open blog forum had also apparently said there was no risk of the Morandi Bridge collapsing.  Could this lead to strains within the coalition?  Italy does not need any more uncertainty now. The spread has widened to Italy Over Germany now standing at +195.8 bps from +133 at the end of July.

Stephen Pope

Macroeconomic Strategist

Stephen Pope is the Managing Partner of Spotlight Group. He has worked in the world of finance since 1982 and has performed d...continued

Comments on this analysis

Your email address will not be published. Required fields are marked *

Latest Related News

Weekly Report / Overview 14th October 2019 – 20th October 2019

USDThe US Dollar continued its decline last week, which has seen a large amount of bullish positions starting to unwind. The Dollar Index (DXY) fell 1.2% to close the week at 97.14. EURThe Euro stayed steady and took advantage of a weaker Dollar, with EUR/USD pushing higher on the week, even though the Eurozone CPI fell to 0.8% YoY, well below the ECB’s 2% target… Continued

FX Explained MacroWatch: w/c 09/09/19

Recap: Brexit grabs the headless (again) The US and China trade war took a positive turn with a Chinese announcement that trade talks would restart in October.The UK Government had in late August effectively announced the closure of Parliament early (proroguing Parliament), which had allowed limited time for Members of Parliament (MPs) to block the UK leaving the EU on 31st October without a deal.MPs… Continued

GBP/USD suffers at Upper AP line as Brexit headlines hit GBP markets

Sterling took a hit across the board after headlines about the British government possibly asking the Queen to prorogue parliament. Gilts pushed higher in response with cable taking a knock to touch its lowest in 4 days. The pair touched its highest since July, but a bearish Andrews Pitchfork scuppered further upside. AP keeps dynamic bear trend intact. We mentioned in our prior post that this level may… Continued

Pound strengthens versus US Dollar and Euro

Pound breaks up (GBPUSD) Euro Pound breaks down (EURGBP) Continued

Forex consolidation, US Dollar strength correcting

US Dollar Index corrects lower, but up trend intact EURUSD reboundsGBPUSD down trend intactUSDJPY negative in broader rangeAUDUSD and NZDUSD send small, very short-term positive signalsUSDCAD sidewaysEURGBP trend stays higher Continued

Forex Brokers in your location