• EUR/GBP bounces off earlier lows near 0.8380.
• UK CPI rose 10.1% YoY in July, 0.6% MoM.
• EMU advanced Q2 GDP is seen expanding 3.9% YoY.

Following a knee-jerk to the vicinity o 0.8380, EUR/GBP regains some composure and now manages to retake the 0.8400 barrier and beyond on Wednesday.

EUR/GBP remains supported by the 0.8350 region

EUR/GBP so far leaves behind three consecutive daily retracements, including a monthly peak just shy of 0.8500 the figure on August 12, although the breach of the key 200-day SMA – today at 0.8430 – has opened the door to fresh weakness in the upcoming periods.

The cross thus reverses the initial knee-jerk to the 0.8385/80 band following the bout of strength in the British pound in the wake of the release of UK inflation figures for the month of July.

According to the latter, headline inflation rose 10.1% in the year to July and 0.6% from a month earlier, while the Core CPI also rose above expectations 6.2% over the last twelve months.

The initial reaction post-CPI release saw investors penciling in further (and larger?) rate hikes by the BoE in its next meetings, which in turned morphed into further legs for the quid. However, the latest dovish tilt at the BoE event and the prospects of a 15-month recession in the UK economy warns against sustainable strength in the sterling ahead.

Closer to home, another revision of the EMU Q2 GDP now sees the region’s economy expanding 3.9% YoY.

EUR/GBP key levels

The cross is gaining 0.03% at 0.8409 and faces the next hurdle at 0.8434 (200-day SMA) followed by 0.8492 (monthly high August 12) and then 0.8584 (weekly high July 21). On the flip side, a breach of 0.8386 (weekly low August 17) would expose 0.8339 (monthly low August 2) and finally 0.8249 (monthly low April 14).