EUR/GBP struggles to defend 0.8800 ahead of EU inflation, UK GDP

• EUR/GBP remains pressured around weekly low, snaps four-week uptrend.
• Bulls cheer strong comments from BOE’s Pill, failed to respect hawkish ECBspeak, record high German inflation.
• UK GDP will be eyed for confirming recession woes and can pare weekly losses of the pair.
• Record high inflation in Eurozone can add strength to the corrective bounce.

EUR/GBP holds lower ground near 0.8810 as it braces for the first weekly loss in five during Friday’s Asian session. The cross-currency pair’s latest weakness contrasts with the UK’s economic pessimism amid hawkish comments from the Bank of England (BOE) policymakers. In doing so, the quote also ignores the European Central Bank (ECB) members’ aggression.

BOE Economist Huw Pill amplified pessimism surrounding Britain as the policymaker said, “It’s hard to avoid the conclusion that fiscal easing announced will prompt a significant and necessary monetary policy response in November.” Recently,  UK Trade Secretary Kemi Badenoch stated that the chancellor is `working well' with the Bank of England.

On the other hand, most of the ECB policymakers, including Olli Rehn, Mario Centeno and Pablo Hernandez de Cos, have recently backed the idea of increasing the benchmark rate by 0.75%. “ECB policymakers voiced more support on Thursday for another big interest rate hike as inflation in the euro zone's biggest economy hit double digits, blasting past expectations and heralding another record reading for the bloc as a whole,” said Reuters in this regard.

It should be noted that Germany’s Consumer Price Index (CPI) rose to 10% in September compared to 7.9% in August and the market expectation of 9.4. Additionally, the Harmonised Index of Consumer Prices (HICP) for the nation, the European Central Bank's (ECB) preferred gauge of inflation, jumped to 10.9% during the stated month compared to 8.8% prior and 10% expected. Furthermore, Eurozone Economic Sentiment Indicator (ESI) declined to 93.7 in September versus the market expectation of 95 and 97.3 in August. Also, the Consumer Confidence for the said month matched -28.8 forecasts and prior readings.

Against this backdrop, the Wall Street benchmarks reversed all of the gains made on Wednesday while the Treasury yields recovered.

Moving on, the final readings of the UK’s second quarter (Q2) Gross Domestic Product (GDP) and the first impressions of Eurozone inflation data for September will be crucial for the EUR/GBP pair traders. As grim expectations from the scheduled data are favoring the pair buyers, any surprises can extend the latest weakness of the quote.

Technical analysis

A three-week-old ascending trend line joins the 21-DMA to highlight the 0.8750 level as crucial downside support for the EUR/GBP traders to watch during the pair’s further downside. Alternatively, the 10-DMA restricts immediate recovery moves near 0.8845.