EUR/GBP stays in gains around 0.8635-0.8640 area after UK/German CPI data

• EUR/GBP regains positive traction and gains support from a combination of factors.
• Mixed UK macroeconomic data raises BoE rate cut bets and weakens the Pound.
• The rise in the German core CPI lends some support to the common currency and spot prices.

The EUR/GBP cross attracts new buyers near the 0.8400 area and stops the previous day’s sharp retracement decline from its highest level since August 23. Spot prices remain with a positive bias around the 0.8435-0.8440 region following the release of UK macroeconomic data and the final German Consumer Price Index (CPI) figure.

The UK’s Office for National Statistics (ONS) reported that the economy expanded again and grew by 0.1% in November after falling 0.1% in the previous month. Other data from the United Kingdom showed that monthly Industrial and Manufacturing Production fell more than expected, by 0.4% and 0.3%, respectively, in November. This comes on top of Wednesday’s softer consumer inflation figures in the UK and offers the Bank of England (BoE) an opportunity to cut interest rates in February. Furthermore, concerns about the UK’s fiscal situation and the risk of stagflation – a combination of high inflation and weak economic growth – weaken the British Pound (GBP).

The common currency, on the other hand, draws some support from a rise in Germany’s annual core inflation, which rose to 3.3% in December from 3.0% the previous month. This turns out to be another factor that remains favorable for the supply tone around the EUR/GBP cross. The data, however, raises stagflation concerns for the Eurozone’s largest economy and reaffirms expectations of further rate cuts by the European Central Bank (ECB). This could limit the Euro’s gains and warrants some caution for bullish traders around the currency pair, making it prudent to wait for acceptance above the very important 200-day SMA before opening new positions.