EUR/GBP rallies past the 200-DMA and 0.8700 figure on risk-off mood

• EUR/GBP has climbed past the 200-day moving average (DMA) of 0.8694.
• Market sentiment worsened with the Middle East conflict escalation and dovish remarks from Fed Chair Jerome Powell.
• The Eurozone economic docket was light, with a positive ZEW Economic Sentiment report and decelerating HICP figures.
• UK inflation report shows a challenging environment for the BoE, with risks of stagflation.

The EUR/GBP rallied on Thursday as the cross-pair trimmed last Wednesday’s losses, climbing past the 200-day moving average (DMA) of 0.8694. At the time of writing, the pair is exchanging hands at 0.8715, gaining 0.01% as the Asian session begins.

EUR/GBP gains momentum as geopolitical tensions and dovish Fed remarks weigh on the British Pound

Market sentiment deteriorated during Thursday’s session, a headwind for the risk-perceived British Pound (GBP), which achieved losses against most of its counterparts. The escalation of the Middle East conflict and dovish remarks by the US Federal Reserve (Fed) Chair Jerome Powell underpinned the Euro (EUR).

A light Eurozone (EU) economic docket left traders adrift to a positive ZEW Economic Sentiment report, while the latest inflation figures of the bloc at 4.3%, showed the HICP is indeed decelerating, as August’s figures were above 5%. Meanwhile, some European Central Bank (ECB) officials shifted from a hawkish stance to a neutral one amid fears that the EU could suffer a recession. ECB policymakers adopted a data-dependent stance, following the Fed’s footsteps.

On the UK front, the latest inflation report at 6.7% YoY showed the BoE’s job is not easy. The risks of a stagflationary scenario arose, although the Gross Domestic Product (GDP) for a 3-month average, climbed from -0.6% to 0.2%.

Ahead in the calendar, the EU’s docket is empty, while Retail Sales in the UK are expected to plunge to -0.3% MoM, below the prior month’s 0.4% advance.

EUR/GBP Technical Levels