signal ahead of UK GDP, EU inflation data

The EUR/GBP exchange rate moved sideways after mixed flash consumer inflation numbers from Europe. It was trading at 0.8800, where it has been in the past few days. The key catalysts for the pair will be the upcoming European inflation figures and UK GDP numbers.

European inflation data

Data published on Thursday sent a mixed picture about inflation in the European Union. In Spain, the headline consumer price index (CPI) dropped from 0.9% in February to 0.4% in March. On a year-on-year basis, inflation almost halved from 6.0% to 3.3%. Core inflation, which excludes the volatile food and energy prices, dropped to 3.1%. This decline was driven by a dip of natural gas prices.

Germany was a different story as the headline consumer price index remained unchanged at 0.8%. It dropped from 8.7% in February to 7.4% on a year-on-year basis. Core inflation came in at 7.8%. This means that two major European economies are having a mixed inflation picture.

The key forex news on Friday will be the flash inflation figure by Eurostat. Economists polled by Reuters expect that the headline consumer inflation dropped from 8.5% in February to 7.1% in March. Core inflation is expected to come in at 5.7%. 

These numbers come at a time when the European Central Bank has become the most hawkish central banks in the developed world. As we wrote here, the bank decided to hike rates by 0.5% this month and pointed to more increases.

The next GBP news will be the upcoming UK GDP data. Economists expect that the country’s economy expanded by 0.4% on a year-on-year basis in the fourth quarter as it avoided a recession. Analysts have increased their estimates of the UK’s economic recovery.

EUR/GBP forecast

EUR/GBP chart by TradingView

The EUR/GBP exchange rate has been in a tight range in the past few days. It was trading at 0.8800 on Friday morning, which was a few points below the year-to-date high of 0.8975. The pair is also consolidating at the 25-period and 50-period exponential moving averages (EMA) while the Relative Strength Index (RSI) has moved below the neutral point at 50.

Therefore, the EUR to GBP price will likely remain in this range on Friday after the UK GDP and European inflation figures. In the coming days, a bearish breakout to 0.8600 cannot be ruled out.