During the Asian session, the EUR/GBP pair develops the "bullish" momentum formed on Wednesday and tests the resistance level of 0.8900 for a breakout.
The euro is supported by the recent speech of the head of the European Central Bank (ECB), Christine Lagarde, before the EU Parliament in Strasbourg, in which she pointed out that there are still significant inflation risks that undermine economic growth in the region. Forecasts are still unclear, given the uncertainty surrounding the military conflict between Russia and Ukraine and the significant volatility in energy prices. However, the official favors further tightening monetary policy, noting that March's 50.0 basis point hike in interest rates is unlikely to be the last.
Investors are reacting to the data on consumer inflation that came out this week: the January figure was corrected by –0.6% from an increase of 0.4% earlier and forecasts of –0.4% and slowed down from 10.5% to 10.1% YoY, better than preliminary estimates of 10.3%. Inflation in the country has been declining for the third month in a row, but experts note that the high cost of food products, real estate, and energy products continues to pressure households. However, according to statistics from the UK Office for National Statistics (ONS), it follows that prices for services in the restaurant and hotel industry and transport have declined slightly, which convinced analysts that at the next meeting in March, the Bank of England would adjust the interest rate by only 25.0 basis points instead of 50.0 basis points previously, having seen the effectiveness of the measures already taken.
On Friday, the focus of investors is the statistics on the dynamics of retail sales in January: it is expected that the indicator will decrease by 0.3% after a 1.0% decline last month and will be corrected by –5.5% YoY after dynamics in –5.8% earlier. January data on manufacturing inflation in Germany will be published today: the market expects prices to fall 1.6% after falling by 0.4% last month.
On the daily chart, Bollinger bands are moderately rising: the price range is narrowing, reflecting the emergence of ambiguous trading dynamics in the short term. The MACD indicator reversed upwards, forming a new buy signal (the histogram is above the signal line). Stochastic keeps a confident upward direction but is close to its highs, signaling that the euro may become overbought in the ultra-short term.
Resistance levels: 0.8900, 0.8938, 0.8977, 0.9000. | Support levels: 0.8864, 0.8817, 0.8777, 0.8750.