EUR / GBP recovers from Friday’s losses hovering around 0.8450

• The single currency cuts losses for two consecutive days, despite the BoE’s prospects for a rate hike.
• The ECB Christine Lagarde reinforces that “inflation is largely transitory”.
• The divergence between the ECB and the Bank of England could benefit the British pound against the single currency.
• EUR / GBP: To extend its decline towards the 0.8385 mark – SocGen.

The EUR/GBP It is recovering from two days in a row of losses, rising 0.27% and trading at 0.8457 during the American session at the time of writing. Despite mounting inflationary pressures, negative macroeconomic data from China and tightening of central bank monetary policy, market sentiment is optimistic. The most important US stock indices register gains between 0.16% and 0.76%, except for the Dow Jones Industrial, which fell 0.15%.

The divergence between the European Central Bank and the Bank of England boosts the GBP against the EUR

On Saturday, October 16, ECB President Christine Lagarde said that “inflation is largely transitory” after delivering the 2021 Per Jacobsson Conference at the IMF. Lagarde added that the ECB pays “a lot of attention” to wage negotiations and other effects that could permanently boost prices.

Meanwhile, over the weekend, Bank of England Governor Andrew Bailey reiterated that the Bank of England “will have to act” to curb inflationary pressures.

The UK economic record featured October’s Rightmove House Price Index, which expanded 1.8% and 6.5% monthly and annually, respectively, above the previous reading.

That said, the divergence of central bank policy appears to favor the British pound. Represented by the move from the October 10 high at 0.8517 to the October 15 low at 0.8422, suggests that downward pressures are increasing on the pair, on expectations of a rise in interest rates from the Bank of England , which could boost the British pound against the shared currency.

EUR / GBP: to extend its decline to 0.8385 – SocGen

According to analysts at Société Générale, a close below 0.8450 on Friday suggests that bearish momentum persists in the EUR / GBP pair: “Staying below 0.8550, EUR / GBP could move down towards projections of 0.8385.”

“The lower band of the consolidation zone since 2016 at 0.8300 / 0.8270 and 0.8200 are the next significant support levels.”

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