EUR/GBP rises after three days of lows and tests 0.8800

• Euro strengthens after inflation data from Spain.
• German economy contracts unexpectedly in the fourth quarter.
• EUR/GBP is ending a three-day losing streak.

EUR/GBP is rising at the start of the week, against a stronger euro after Eurozone data. The cross is in the area of ​​daily highs at 0.8800, testing said key level, which also includes the 20-day moving average.

The euro received a boost from the rise in Eurozone bond yields after inflation data from Spain surprised with a rise. One positive piece of data was the improvement in the region’s confidence index. On the downside, the German economy contracted 0.2% in the fourth quarter.

It will be a week that can bring a lot of activity in the EUR/GBP cross. In addition to the inflation data for the Eurozone that will be released, there is the decision of the central banks. On Thursday both the bank of england (BoE) as the European Central Bank (ECB) will speak.

The BoE is expected to raise interest rates by 50 basis points, although there are also those who see 25 basis points as more likely. The dissent in the Monetary Policy Committee would continue. What he says about the future of the BoE will be key for sterling.

On the same day, the ECB would also raise interest rates, in this case with much firmer expectations that it would be 50 basis points. The ECB signals would be a continuity in the monetary adjustment.

The divergence between a more hawkish ECB than the BoE going forward has been a key factor behind the EUR/GBP December rally. In January a consolidation is being seen at levels close to 0.8800. If there is a firm break above 0.8900, the euro would be ready for a test at 0.9000. Before it should overcome the resistance at 0.8860.

In the opposite direction, a close (mostly weekly) below 0.8730 would be a sign in favor of the pound. The next support is at 0.8670.

technical levels