EUR/GBP Falls as Stronger-Than-Expected UK Data Supports Pound
The EUR/GBP exchange rate has been moving lower on Friday, retreating to the lower end of its range from the past week. This decline is largely due to stronger-than-expected UK economic data supporting the British Pound (GBP), while the Euro (EUR) struggles against most major currencies despite the European Central Bank's (ECB) 25-basis-point interest-rate hike on Thursday.
The UK economy expanded 0.4% month-over-month in July, surpassing expectations of no growth and following a 0.3% increase in June. Additionally, Industrial Production and Manufacturing Production exceeded forecasts, rising 0.2% and 0.9% respectively.
Meanwhile, the Euro has failed to benefit from the ECB's rate hike as it was widely anticipated, and largely aimed at addressing energy-driven inflation caused by the war in the Middle East. Rising Oil and gas prices present a stagflationary backdrop for the energy-dependent Eurozone, with the ECB warning that inflation risks are tilted to the upside and growth risks to the downside.
The EUR/GBP's technical analysis suggests limited follow-through after rebounding from below 0.8500 in mid-July, with gains capped by the 0.8600-0.8610 region. This former support zone now acts as resistance and closely aligns with the 100-day simple moving average (SMA) at 0.8598.