EUR/GBP extends its range-bound trade on Monday, consolidating recent losses as repeated rejections near the multi-month resistance around 0.8750 continue to cap the upside. At the time of writing, the cross is trading around 0.8736, with the British Pound (GBP) modestly outperforming the Euro (EUR).
Traders showed a muted reaction to the latest German IFO survey, as the data offered only limited support to the Euro. Germany’s IFO Business Climate Index rose to 88.6 in February, beating the 88.4 forecast and improving from 87.6 in January.
The IFO Current Assessment Index increased to 86.7, above expectations of 86.1 and up from the previous 85.7 reading. Meanwhile, the IFO Expectations Index came in at 90.5, in line with forecasts and higher than January’s 89.6.
Traders are refraining from taking aggressive directional bets ahead of key data releases scheduled for Tuesday, including Eurozone inflation figures and Germany’s fourth-quarter Gross Domestic Product (GDP).
Economists expect the Eurozone Core Harmonized Index of Consumer Prices (HICP) to ease to 2.2% YoY in January, down from 2.3% in December. The headline HICP is forecast to hold steady at 1.7% YoY.
Markets are also waiting for preliminary inflation data from Germany, France and Spain later this week. These figures are expected to provide more clarity on the inflation trend across the Eurozone and could influence expectations for the European Central Bank’s (ECB) monetary policy path, as markets widely expect the central bank to remain on hold throughout the year.
In the UK, expectations are growing that the Bank of England (BoE) could cut interest rates as early as March following softer inflation and weaker employment data released earlier this month.
The British Pound also faced pressure following dovish remarks from BoE policymaker Alan Taylor. Taylor said there are “two or three more cuts to go before reaching a neutral rate.” He added that weaker-than-expected productivity growth could pose a risk to the outlook.
The UK economic calendar is virtually empty this week, leaving EUR/GBP largely driven by Eurozone data and broader market sentiment.
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