EUR/GBP renews intraday low under 0.8600 but lacks downside momentum on mixed UK inflation details

• EUR/GBP stays pressured at two-week low despite recent whipsaw.
• UK inflation CPI softens in July, Core CPI came in better-than-forecast.
• Mixed concerns about Euro also weigh on cross-currency pair.
• Mid-tier Eurozone data eyed for clear directions, risk catalysts are the key.

EUR/GBP bears keep control for the fourth consecutive day despite mixed UK inflation numbers. That said, the quote prods a two-week low marked the previous day around 0.8575 amid early Wednesday in Europe. It’s worth noting that the cross-currency pair initially dropped to 0.8574 on the British price pressure data before recovering to 0.8584 by the press time. The pair’s recent whipsaw could be linked to the unclear Consumer Price Index (CPI) and mixed details from London.

That said, UK CPI slides to 6.8% YoY and -0.4% MoM from 7.9% and 0.1% respective priors but the Core CPI reprints the 6.9% yearly figures for July.

Also read: Breaking: UK CPI inflation declines to 6.8% in July, as expected

Not only the mixed UK inflation clues but the political jitters surrounding Britain, especially after the ruling Conservative Party’s disappointing performance in the by-elections, also challenge the British Pound.

Furthermore, the recent improvement in the Eurozone and German statistics, as well as receding fears about recession, puts a floor under the EUR/GBP prices. On Tuesday, Germany’s ZEW Economic Sentiment improved to -12.3 for August versus -14.4 expected and -14.7 prior but the Current Situation gauge dropped to -71.3 from -59.5 previous readings and -63.0 market forecasts. That said, the Eurozone ZEW Economic Sentiment also recovered to -5.5 from the analysts’ estimations of -12.0 and -12.2 prior. Not only the data but the official statement from the ZEW Institute also appeared optimistic as it said, “Respondents, by and large, do not anticipate any further interest rate hikes in the eurozone and the United States and the economic outlook for the USA has seen a significant increase – these factors contribute to the improved expectations for Germany.”

However, the European Central Bank (ECB) hawks appear running out of steam while the Bank of England (BoE) is likely to witness further rate hikes, considering the strong employment report and upbeat wages, which can keep the EUR/GBP bears hopeful. As per the latest British jobs report published the previous day, the UK’s headline Employment Change marks -66K figures for June versus 75K expected and 102K prior whereas the ILO Unemployment Rate jumps to 4.2% for three months to June compared to the market’s expectations of staying unchanged at 4.0%. More importantly, the Average Earnings including and excluding bonuses for three months to June improves heavily and boosts the hawkish expectations from the Bank of England (BoE), which in turn seems to have fuelled the Pound Sterling after the data release.

Moving on, a slew of second-tier economics from the Eurozone, including the second readings of the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) and July Industrial Production, will be important to watch for clear directions.

Technical analysis

A clear U-turn from the 100-DMA resistance, around 0.8665 by the press time, joins the looming bear cross on the MACD and a steady RSI (14) line to keep the EUR/GBP pair sellers hopeful of breaking a five-week-old support line and aim for the previous monthly low of around 0.8500.