Will the Euro Emerge Victorious in the Clash of the Currencies?

Piece by Alexa Smith, Trive Financial Market Analyst 

In this clash between two titans, inflation takes centre stage, while the EURGBP currency pair is caught in the midst of the action. The Bank of England (BOE) took a bold stance by aggressively hiking rates by 50 bps last month in a bid to tame stubbornly high inflation in the UK. The move appeared to be effective, as headline inflation cooled at a faster rate in June, dropping from 8.7% to 7.9%, beating expectations of 8.2%. Core inflation followed suit, declining from 7.1% to 6.9%. 

The slowdown in inflation may lead the BOE to skip an interest rate hike this month, impacting the Sterling’s slight gain. On the other side of the ring, European headline inflation also cooled, moving from 6.1% to 5.5%, aligning with forecasts, but declining at a slower pace than for the Sterling. However, core inflation in Europe increased from 5.3% to 5.5%, exceeding forecasts by 0.1% and introducing a glimmer of hope regarding the prospect of further rate hikes by the ECB. 


The EURGBP currency pair gained upward momentum, establishing resistance at 0.86920. A slight pullback attempted to drive downside momentum but fell short of the 23.60% Fibonacci level, establishing support at 0.86561. However, the recent leg up may drive upward momentum towards the 0.87067 major resistance if the upside momentum persists.  

However, the current price level could hold, which may encourage downside pressure towards the 0.86561 support. Where this support level fails to hold, demand factors may encourage a pullback towards the Golden Ratio, which may be a pivot point for further downside momentum.  


The EURGBP currency pair is edging higher on the backdrop of inflation slowing at a faster rate in the UK. If the upward momentum persists, the currency pair may be encouraged to retest the 0.87067 major resistance. However, demand-side pressure may encourage a pullback towards the Golden Ratio.  

Sources: TradingView, Reuters