EUR/GBP dips slightly as hawkish BoE bets weight

• The EUR/GBP has lost 0.20%, now trading near the 0.8560 level.
• Sticky UK inflation boosts the strength of the pound as there likely won’t be cuts by the BoE in Q1.
• Euro suffers a hit following ECB's dovish signals.

Hawkish bets on the Bank of England (BoE) are pressuring the EUR/GBP pair, trading at a round level of approximately 0.8560, resulting in losses in Thursday's session. Markets continue to digest Wednesday’s inflation figures from the UK and the European Central Bank (ECB) dovish signals..

On the ECB’s side, the market is discounting a dovish approach from the bank with the postponement of rate cuts until June amid a backdrop of limited fresh data. As for now, a rate cut by summer remains a viable scenario, and investors discount an overall 150 bps of easing in 2024.

On the other hand, expectations of the Bank of England (BoE) lowering interest rates in March have significantly dimmed, and investors foresee cuts as late as in Q2. That being said, investors are discounting 125 bps in 2024. This came in hand with data from the UK's Office of National Statistics, which highlighted stable labor demand coupled with sticky inflation figures. Moreover, in case the divergences between the ECB and the BOE widen, the Euro may suffer further losses against the Pound in the coming sessions.

On Wednesday, the ONS announced an unexpected growth in headline inflation, ticking up 0.4%, a reversal from a 0.2% contraction the previous month. Yearly CPI also raised eyebrows, moving to 4% against a prior reading of 3.9%, contrary to market predictions of a slowdown to 3.8%.

EUR/GBP levels to watch

The daily chart indicators reflect a dominant tendency favored by the selling momentum for the pair. The Relative Strength Index (RSI), with its negative slope and position in negative territory, indicates a bearish sentiment. This suggests that the sellers are in control, pushing the market towards a potential downtrend. The Moving Average Convergence Divergence (MACD), with rising red bars, also accentuates this bearish outlook.

Adding to the bearish scenario, the pair remains beneath the 20,100, and 200-day Simple Moving Averages (SMAs), on the larger context, illustrating a continued sellers' dominance on a broader scale. Any buyer-led recovery would require significant breakthroughs above these levels, to change this bearish trajectory.

EUR/GBP daily chart