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British Pound (GBP) Price Outlook: Near-Term Bullish for EUR/GBP

British Pound (GBP) Price Outlook: Near-Term Bullish for EUR/GBP

Martin Essex, MSTA, Analyst

GBP price, news and analysis:

  • European Central Bank Vice President Luis de Guindos said Wednesday that the Eurozone economy is growing faster than the ECB previously expected, potentially bringing closer the day when it will begin to wind down its monetary stimulus programs.
  • That’s positive for EUR/GBP and the message may well be reinforced later in the day by the hawkish Bundesbank President Jens Weidmann.
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EUR/GBP outlook still positive

EUR/GBP was edging lower in early European trading Wednesday, possibly reacting to data showing that German retail sales fell by 0.3% year/year in July when a 3.7% increase had been forecast by economists polled by the news agencies. There was also a much larger drop than expected month/month.

However, as the data are for July and therefore largely of historic interest, it would be no surprise if the decline in EUR/GBP were reversed. European Central Bank Vice President Luis de Guindos was reported by the Spanish newspaper El Confidencial Wednesday as saying that the Eurozone “economy is performing better in 2021 than we expected, and this will be reflected in the projections that will be published in the coming days.”

That suggests the ECB might begin to withdraw some of its monetary stimulus earlier than previously expected – potentially a positive for EUR/GBP.

EUR/GBP Price Chart, One Hour Timeframe (August 20 – September 1, 2021)

Latest EUR/GBP price chart.

Source: IG (You can click on it for a larger image)

The de Guindos message could be repeated later this session by the hawkish Bundesbank President Jens Weidmann, who is due to open a Bundesbank symposium at 1200 GMT and could well back his case by referring to this week’s news that Eurozone inflation jumped in August to its highest level for almost 10 years – increasing by 3% year/year compared with the forecast 2.7% and the previous 2.2%.

--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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