EUR/GBP retreats from daily highs after mixed EU, UK data

• Eurozone GDP contracted 0.1% quarter-on-quarter in the third quarter, indicating a slowdown in the economy despite aggressive tightening by the ECB.
• In the UK, employment figures met expectations, but average earnings, including bonuses, rose more than expected, signaling possible wage inflation.
• RaboBank analysts forecast a possible decline of EUR/GBP below 0.8700, citing weak German economic data and a possible technical recession in the Eurozone.

He EUR/GBP reversed course after reaching a daily high of 0.8730, retreating towards 0.8700 in the middle of the North American session, after economic data from the Eurozone (EU) and the United Kingdom (UK) favored the latter. At the time of writing, the cross was trading around 0.8700, with a loss of 0.14%.

Cross approaches 0.8700 amid EU GDP contraction and strong UK employment ahead of UK CPI

The EU’s Gross Domestic Product (GDP) contracted by 0.1% quarter-on-quarter as expected in the third quarter in the second estimate, and in annual figures it stood at 0.1%, in line with estimates, a sign that the economy is slowing amid more than 400 basis points of tightening by the European Central Bank (ECB). However, the bloc’s employment data suggested that the labor market is tightening, which could justify the ECB keeping the door open to further tightening.

In the UK, the Office for National Statistics (ONS) released employment figures, which were as expected, although Average Earnings, including bonuses, three months to date on an annual basis increased by 7.9%, exceeding forecasts of 7.4%, but below the 8.2% in August. This could justify further action by the Bank of England (BoE), although the latest comments from its chief economist, Huw Pill, suggest that further rate hikes will not be necessary.

Rabo Bank analysts expect the EUR/GBP to fall below 0.8700, “due to weak German economic data and our view that the Eurozone could already be in a technical recession.”

Meanwhile, traders’ attention was focused on Wednesday’s UK inflation report, with October CPI on an annual basis expected to fall to 4.8% from 6.7%, and the underlying seen at 5.8. % from 6.1%. The monthly CPI will be 0.1%, below the 0.5% in September.

EUR/GBP Price Analysis: Technical Outlook

The euro is widening its losses against the pound as economic growth falters across the bloc. Therefore, the pair is testing a three-month-old support trend line that was briefly broken on November 3, when the pair fell to a three-week low of 0.8649 before buyers reclaimed the 0.8680 zone. , again above the aforementioned trend line. However, at the time of writing, EUR/GBP is testing the latter, ann a sustained breakout could open the door to testing the 200-day moving average (DMA) at 0.8684, followed by the 50-DMA at 0.8663 .