EUR / GBP clings near three-month lows, just above 0.8500

• EUR / GBP witnessed some subsequent selling for the fourth consecutive session on Wednesday.
• Higher-than-expected UK CPI figures boosted the British pound and continued to exert pressure.
• The shared currency benefited from a weaker USD and helped limit the slide, at least for now.

The crossing EUR/GBP it remained depressed for the middle of the European session and was last seen hovering around the 0.8510 region, just above the three-month lows hit earlier this Wednesday.

The cross extended its recent strong pullback from the 0.8615-20 region, or the highest level since mid-June touched last week and witnessed some selling for the fourth straight session. The British pound gained a strong boost following the release of higher than expected UK consumer inflation figures, which in turn put some pressure on the EUR / GBP cross.

In fact, the UK Office for National Statistics (ONS) reported that the headline CPI rose 2.5% year-on-year in June, compared to consensus estimates that point to a rebound from 2.1% prior to 2.2%. This marked the highest level in nearly three years and fueled speculation that the Bank of England will have to consider cutting its massive stimulus program sooner.

That said, a modest rebound in the shared currency, supported by a modest pullback in the US dollar, helped the EUR / GBP cross find some support near the key psychological level of 0.8500. The aforementioned level should now act as a key point for short-term traders, which if decisively broken should pave the way for an extension of the ongoing downward trajectory.

Meanwhile, a dispute over the size of the UK’s Brexit bill and concerns about the new variant of the coronavirus could prevent sterling bulls from making aggressive bets. This should lend some support to the EUR / GBP cross and help limit losses as market participants are now looking forward to the UK monthly employment details, to be released on Thursday, for further momentum.

Technical levels