EUR / GBP falls below 0.8500 again, but for now finds support at the 50-day SMA

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  • EUR / GBP falls below 0.8500, although it finds support at the 50-day SMA at 0.8480.
  • The pair falls despite upbeat rhetoric from the ECB and mixed UK GDP figures.

The EUR/GBP moves lower on Wednesday and it is trading around 0.8485, which coincides with the 50-day moving average. At time of writing, the pair is losing around 0.2% on the day, having opened the day above the 0.8500 level.

The fall of the EUR / GBP occurs despite a mixed UK GDP report published at the start of the European session on Wednesday. The UK economy grew at a rate of 1.1% in the third quarter, according to data this morning, slower than the expected pace of 1.3%, although the annual growth rate was better than expected at 6.8% (the forecasts were 6.6%). The drop also comes despite more optimistic rhetoric from ECB policy makers, including the president of the Slovak central bank, Peter Kazimir, and that of the Austrian central bank, Robert Holzmann.

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The former joined a host of other ECB members who have been warning of the risks of rising inflation in the eurozone, while the latter, which has also recently warned of rising inflation risks, outlined its scenario for rate hikes in 2022. In an extreme scenario, it warned, the ECB could raise rates before the end of next year, adding that if the ECB improved its inflation forecast for 2023-24 Above the 2.0% target, that would signal a rate hike in the next two quarters.

The poor performance of the EUR / GBP can be explained by the fact that, despite the tenuous feeling of trading in other asset classes, Forex markets took a risk appetite stance on Wednesday. The GBP is more risk sensitive compared to the Euro, so this normally weighs in on the EUR / GBP. But currency strategists have said that volatility in the coming sessions, or indeed through early January 2022, is expected to be mild as markets enter their typical Christmas break.

EUR / GBP technical levels

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