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EURGBP: Sterling Gains Versus Euro After Weak German Inflation


EURGBP was lower on Tuesday as the market absorbed weaker German inflation numbers and a buoyant U.K. housing market.

Inflation in the Eurozone’s largest economy was expected to tick higher to -0.1% from -0.2% but the actual number was -0.3%. Traders maybe expected this due to the latest lockdowns in the country but it could put pressure on the European Central Bank to take action in their next policy meeting. Today’s EU inflation could confirm that with a reading of 0.2% expected for the bloc countries.

The U.K. housing market is holding up with a rise in mortgage approvals to a 13-year high yesterday. Approvals were at 97.5k yesterday as buyers take advantage of an emergency tax cut and remote workers look for larger homes. Today’s Nationwide house price index confirmed the market’s strength with a reading of 6.5% versus an expected 5.5%.

Brexit talks are still at a stalemate and Michael Gove with Michael Gove criticizing the EU negotiators today, saying:

“The EU still want us to be tied to their way of doing things. The EU are at the moment reserving the right if there is any sort of dispute not quite to rip everything up but to impose some really penal and tough restrictions on us and we don’t think that’s fair.”

EURGBP Technical Outlook

EURGBP found support at the 0.8870 level which held in August and twice in November so this is a key level that will likely depend on Brexit. If the price holds then a test of 0.9175 is possible again. The first target on the downside is 0.8700.

EURGBP Daily Chart