EUR/GBP rises as UK inflation unexpectedly falls. DAX slips on US inflation jitters.

Pixabay

EUR/GBP rises as UK inflation unexpectedly falls

EUR/GBP is heading higher after UK inflation unexpectedly fell in August.

UK consumer prices rose by 9.9% YoY in August, down from 10.1% YoY in July and below the 10.2% expected. A fall in petrol prices helped inflation cool.

The data could take a little pressure off the BoE as it struggles to tame inflation. It could also fuel speculation that UK inflation has peaked. Furthermore, Liz Truss’ energy support package is expected to prevent a further surge in inflation as energy bills should remain roughly at their current levels.

The BoE will meet next week to discuss monetary policy. The central bank is expected to raise interest rates by 50 or possibly 75 basis points.

Meanwhile, the euro is heading higher, ahead of eurozone industrial production data which is expected to contract 1% MoM in July.

Speeches from both ECB’s President Lagarde and EU’s Ursula von der Leyen could drive the common currency.

Where next for EUR/GBP?

EURGBP trades higher, above its 20 & 50 sma and it’s a steep rising trendline from the start of the month.

The bullish RSI, combined with the 20 sma crossing above the 50 sma provide signals that keep buyers hopeful of further gains.

Buyers must take out resistance at 0.8725 the September high and June high, to extend the bullish trend towards 0.88.

Sellers will look for a move below 0.8570 the 20 sma and the September 6 low to expose the 50 sma at 0.85.

DAX slips on US inflation jitters

The DAX closed 2% lower yesterday and is seeing follow-through selling today after the hotter-than-expected US inflation data.

The sharp rise in US core inflation paves the way for a more hawkish Federal Reserve, which hit risk sentiment hard. US stocks saw the worst one-day selloff in 2 years.

Attention today will be on a speech from the EU Commission President Ursula von der Leyen, who could publish the first details on the EU’s energy relief plan.

If measures appear to be convincing, with the potential to ease the burden on the economy, risk sentiment and the DAX could benefit.

Where next for the DAX?

The DAX’s rebound from 12600 ran into resistance at 13570, a two-week high. The index continues to trade below its falling trendline and its 50 sma. The price is found support on the 20 sma at 13090. Sellers will need to break down this level to extend the selloff towards 12600, the September low and 12450, the 2022 low.

Buyers will need to retake yesterday’s high of 13570 to test the falling trendline resistance at 13700.

More By This Author: