EUR/GBP rises to multi-month highs after German inflation data, BoE decision looms

• EUR/GBP rose to a high around 0.8740, it highest level since May.
• German CPI from October came in lower than expected at 3.8% YoY;  Q3 GDP preliminary estimates beat expectations.
• All eyes are on Thursday's BoE meeting; no rate hikes are priced in.

At the beginning of the week, the EUR/GBP cross gathered momentum and jumped to its highest level since early May, near 0.8740. On the one hand, the Euro seems to be getting traction after the report of better-than-expected Gross Domestic Product (GDP) while soft inflation figures from October failed to trigger a reaction. On the other hand, investors await the Bank of England (BoE) decision on Thursday.

Investors assess German data after ECB's decision

Germany reported that the Consumer Price Index (CPI) from October declined to 3.8% YoY, lower than the 4% expected and the last figure of 4.5%. In addition, the Gross Domestic Product (GDP) preliminary estimates from Q3 saw the German economy contracting at an annualised rate of 0.3% while the markets expected a 0.7% contraction. It is worth noticing that the European Central Bank (ECB) and Christine Lagarde highlighted the economic challenges the Eurozone is facing so the Euro may get further traction if economic reports come in better than expected. Regarding the following ECB decisions, the bank has not hinted at any hikes, and Lagarde pointed at that rates will be kept at restrictive levels as long as necessary to combat inflation.

On the GBP's side, markets are discounting that the Bank of England will hold rates steady at 5.25% in Thursday's decision. In addition, the Monetary Policy Committee (MPC) vote split and Andrew Bailey's words will be closely looked by investors in order to continue placing their bets for the next meeting. Furthermore, the bank will release fresh macroeconomic forecasts, which will also be important as the British economy has faced also challenges, and the bank's outlook may further impact the Pound.

EUR/GBP Levels to watch 

Upon observing the daily chart, the outlook remains neutral to bullish as the bulls are gaining momentum, but they still need to conquer more ground to confirm a recovery for the short term. The Relative Strength Index (RSI) demonstrates a favourable upward trend above its midline, while the Moving Average Convergence (MACD) displays green bars. On the other hand, the pair is above the 20,100,200-day Simple Moving Average (SMA), pointing towards the prevailing strength of the bulls in the larger context.

 Support levels: 0.8695 (200-day SMA), 0.8675 (20-day SMA), 0.8650.

 Resistance levels: 0.8740, 0.8750, 0.8800.

EUR/GBP Daily Chart