EUR/GBP reaches new weekly lows around 0.8333 following Wednesday’s hot UK’s inflation

• On Wednesday, the UK’s Office of National Statistics (ONS) revealed higher than expected inflation figures.
• The conflict between Russia and Ukraine weighed on the single currency.
• The EUR/GBP breach of 0.8345 would exacerbate a fall towards 0.8300.

On Thursday, as the American session progresses, the EUR/GBP drops for the second consecutive day in the week, trading at 0.8338 at the time of writing. The financial market mood remains sour, with no de-escalation of the conflict between Russia and Ukraine in eastern Europe, a headwind for the EUR.

Also, UK’s inflation revealed on Wednesday increased at the fastest annual pace in 30 years, increasing the odds of another rate hike of the Bank of England on its next meeting. The UK Consumer Price Index (CPI) increased to 5.5% in January, the highest since March 1992. Money market futures expect the BoE’s interest rates to rise to 2% by the end of 2022.

An EU absent economic docket left adrift EUR/GBP traders to ECB speakers, led by Chief Economist Philip Lane. He said tightening conditions would be met if inflation remained above the 2% target over the medium term while ensuring to “not over-react” to high near-term inflation, which could induce excessive monetary tightening, pushing inflation persistently below the 2% target over the medium term.

Those factors were a headwind for the EUR/GBP, as more ECB policymakers pushed back higher rates, without expressing it directly. Meanwhile, the Bank of England would keep tightening monetary policy conditions, favoring the GBP vs. the EUR in the near term.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP stalled its rally two days ago at the 50-day moving average (DMA) at 0.8400. Since then, EUR/GBP sellers entered the market, pushing the pair to fresh weekly lows at 0.08333, leaving the 0.8345 weekly support behind.

Therefore, the EUR/GBP is downward biased, and its first support level would be the January 20, daily low at 0.8304, near the 0.8300 psychological figure. Breach of the latter would expose the YTD low at 0.8283.