EUR/GBP knocks lower, kicking into 0.8670, Lagarde sees further EU weakness

• The EUR/GBP is falling in Monday trading, stepping away from the 0.8700 handle.
• The ECB's Lagarde sees further weakness in the European economy.
• Analysts expect the EUR/GBP to gain ground heading into the end of the year on UK headwinds.

The EUR/GBP is losing ground on Monday, with the Euro slipping following dovish comments from the European Central Bank's (ECB) President Christine Lagarde.

Lagarde: further weakness in third quarter

ECB President Lagarde noted that there has been an overall slowdown in momentum for the EU economy, and job creation continues to moderate.

The ECB sees further weakness for the third quarter, and the EU's central bank has also delayed the completion of its policy framework review, which has been pushed out to sometime by the spring of 2024.

Despite Monday's backslide, the Euro (EUR) continues to trade well against the Pound Sterling (GBP) overall looking longer-term. The EUR/GBP managed to swing into a fresh four-month high before falling back to 0.8670. 

Analysts at Danske Bank expect the trend to continue, with the EUR/GBP forecast to hit 0.8800 by the end of the year, citing greater headwinds for the Pound Sterling thanks to a dovish Bank of England (BoE).

Read More:

Lagarde speech: Recent indicators point to further weakness in third quarter

EUR/GBP to move only modestly higher to 0.88 over the coming year – Danske Bank

The economic calendar is notably thin for both the Euro and the Pound Sterling for the first half of the trading week with very little on the data docket.

Euro traders will be making note of the ECB's monthly bulletin due on Thursday, while Friday brings UK Gross Domestic Product (GDP) and EU Consumer Price Index (CPI) figures.

Market forecasts see the annualized GDP growth rate for the UK holding steady in the 2nd quarter at 0.4%.

On the EU CPI side, median estimates expect the harmonized CPI index to lag slightly, forecast to print at an annualized 4.8% for the month of September.

EUR/GBP technical outlook

The EUR/GBP slipped in Monday trading to test the 0.8670 region, and intraday technical support currently sits at the 100-hour Simple Moving Average (SMA) near 0.8660, with a rising trendline marked into hourly candles from last week's swing low into 0.8610.

Daily candlesticks see the Euro-Pound pair trading back from the 200-day SMA that currently sits just beneath 0.8720, and failure to capture fresh bullish territory from here will see the pair set to re-challenge near-term swing lows between 0.8580 and 0.8520.

EUR/GBP daily chart

EUR/GBP technical levels