- The EUR / GBP gained some positive traction for the second consecutive session on Monday.
- The mixed readings of the German CPI did little to sway the euro or provide new momentum.
- The optimistic UK economic outlook continued to prop up the British pound and limited the rise.
The crossing EUR/GBP it maintained its modest gains at around 0.8600 and had a rather subdued reaction to mixed German consumer inflation figures.
Preliminary data released by Destatist showed that the overall German CPI is forecast to fall to 0.5% in May from 0.7% the previous month. However, this was better than consensus estimates that pointed to a 0.3% reading. On an annual basis, the CPI rose 2.5% versus market expectations of an increase to 2.4% from 2% in April. Further details revealed that the Harmonized Index of Consumer Prices (HICP), the inflation indicator preferred by the European Central Bank, rose to 2.4% year-on-year and disappointed consensus estimates that point to a reading of 2.5%.
This comes amid subdued demand for the US dollar, which extended some support to the shared currency and provided a modest rise to the EUR / GBP cross. This marked the second day in a row of a positive move and pushed the crossing away from the two-and-a-half week lows touched last Friday. That said, the rise remains limited amid optimistic prospects for the UK economy following a gradual easing of lockdown measures. In fact, UK Prime Minister Boris Johnson said last week that there is nothing in the data to delay the plan to completely end the restrictions on June 21.
In addition, Bank of England lawmaker Gertjan Vlieghe indicated that the central bank is likely to raise rates well into next year. Vlieghe also noted that an increase could come sooner if there is a smooth transition from the permit and the economy recovers faster than expected. The combination of factors acted as a tailwind for the British pound and kept any significant gains for the EUR / GBP cross in check, at least for the time being. This, in turn, warrants some caution for bullish traders and before positioning for any further appreciation moves.
Technical levels
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