The EUR/GBP forex price has been in a consolidation phase as investors refocused on the upcoming European Central Bank (ECB) and Bank of England (BoE) decisions. It was trading at 0.8600, where it has been in the past few days. This price is about 7.36% below the highest level on September 22.
ECB and BoE decision
The EUR/GBP exchange rate will be in the spotlight this week as investors braced for important forex news of the month.
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On Monday, the Office of National Statistics (ONS) said that the UK avoided a recession in October. The economy expanded by 0.5% between September and October. That increase was better than the median estimate of 0.4%.
Still, the economy contracted by 0.3% in the three months to October. That contraction was the biggest increase since the first quarter of 2021. In a statement last month, a non-partisan government office warned that the UK would be in a recession for a while.
The next catalyst for the EUR to GBP price will be the latest UK consumer and producer inflation data scheduled for Wednesday. Economists expect the data to show that the headline inflation dropped to 10.9% in November while core inflation dropped from 6.5% to 6.4%.
The interest rate decision by the ECB and the BoE will be the next main event to watch this week. Economists polled by Reuters expect that the ECB will hike rates by 0.75% for the second straight month. It will then hint that it will likely start hiking rates at a slower pace in the first quarter of the year.
On the other hand, the BoE will hike rates by 0.50% in a bid to reign in on the elevated inflation. Investors will then react to their forecast for next year’s hikes. The bank will likely go slow on rate hikes since the UK is expected to be in a recession for a while. As we wrote here, the Federal Reserve will also deliver its rate decision this week.
EUR/GBP forecast
The EUR/GBP exchange rate has been in a tight range in the past few days. As a result, the pair is consolidating at the 25-day and 50-day moving averages. It is also loitering at an important support level, where it has struggled to move below this year.
The Relative Strength Index (RSI) remains slightly below the neutral level of 50. Therefore, the pair will likely have a bearish breakout as sellers target the key support level at 0.8400.
