Euro gains momentum following Spain’s inflation data, ahead of ECB.
6.EUR/GBP challenges 0.8800 after finding support at 0.8755.The EUR/GBP is rising on Monday after falling for three consecutive days. The euro is rebounding from weekly lows near 0.8755 and is testing the 0.8800 area, supported by the latest round of Eurozone economic data and ahead of monetary policy decisions.
Data released on Monday showed Inflation in Spain surprised to the upside. The Harmonised Consumer Price Index in Spain rose to 5.8% in January from 5.5% in December and above the market consensus of 4.8%. It was the first acceleration since July supporting expectations of a hawkish European Central Bank (ECB). More Euro Zone inflation data is due on Tuesday.
In Germany, the economy contracted 0.4% during the fourth quarter, against expectations of a flat reading, according to preliminary data. On the positive side, Consumer Confidence in the Eurozone improved to -20.9 in January, while the Economic Sentiment also ticked higher to 99.9.
After the numbers, Eurozone government bond yields rose, supporting the Euro across the board. The German 10-year yield rose to 2.32%, the highest since January 6.On Thursday, the ECB will have its monetary policy meeting. A 50 basis points rate hike is priced in. The statement and clues about the future path will be the critical factors of the meeting.
In the UK, UK Prime minister Rishi Sunak said he will not raise taxes in order to fund pay raises for Health Service workers. During the weekend, Sunak fired Conservative Party chairman Nadhim Zahawi over a tax row.The Bank of England is expected to raise its key interest rate by 50 basis points on Thursday, although many analysts expected a smaller increase. There is a division at the Monetary Policy Committee that will likely continue this week.
The EUR/GBP cross will likely have a volatile week, particularly on Thursday, the central bank’s day. Ahead of those critical events, the cross is moving sideways, testing the 20-day Simple Moving Average and the 0.8800 area. On the upside, the immediate strong resistance is seen around 0.8860. On the flip side, a close below 0.8730 should open the doors to more losses.
EUR/USD retreats further below 1.0900 amid risk aversion
EUR/USD has accelerated its decline below 1.0900 after having spent the first half of the day fluctuating in a tight range near that level. The risk-averse market environment, as reflected by falling US stocks, helps the US Dollar gather strength and weighs on the pair in the American session.
GBP/USD loses the 1.2400 threshold on US Dollar demand
GBP/USD came under bearish pressure and declined towards 1.2360 in the second half of the day on Monday. The cautious market mood ahead of this week’s high-impact events seems to be supporting the US Dollar and capping the pair’s upside.
Gold: Investors defend the $1,900 threshold ahead of critical first-tier events
Spot gold trades uneventfully for a second consecutive day, hovering around $1,923 a troy ounce. The Greenback started the week with a positive tone, although gains were modest ahead of the multiple first-tier events scheduled for later this week.