- EUR / GBP picked up pace on Tuesday and rose above 0.8500, to a two-week high.
- The weaker dollar, the warmer than expected Eurozone CPI benefited the common currency.
The EUR / GBP maintained its tone of demand after having exceeded 0.8500, and after the preliminary inflation data for the Eurozone, which showed figures above expectations.
The The crossover regained positive traction on Tuesday and extended the rally that began last week from the 0.8380 support zone, or the lowest level since February 2020. The common currency witnessed another episode of a short-hedging move amid the weak tone of the dollar.
The common currency also relied on Higher-than-expected Eurozone consumer inflation figures for November. In fact, the headline CPI accelerated to a 4.9% year-on-year rate in November versus market expectations of a drop to 3.7% from the 4.1% rise reported the previous month. Additionally, the underlying reading also beat consensus estimates and the European Central Bank’s 2% target, hitting a 2.6% year-on-year rate for the reported month.
On the other hand, lingering uncertainties related to Brexit further contributed to the relative underperformance of the British pound against its European counterpart. The stalemate in negotiations between the UK and the European Union on the Northern Ireland Protocol, along with controversies over subsequent fishing rights between France and Britain, continued to act as a headwind for the British pound.
The combination of factors favors bullish traders and supports the prospects for additional earnings. The positive outlook is reinforced by the fact that the EUR / GBP cross has found acceptance above the 0.8500 mark. Therefore, a further move towards the next relevant hurdle test, around the 0.8535-40 horizontal zone, remains a clear possibility.
Technical levels
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