Euro stays neutral against Pound ahead of UK inflation data

• EUR/GBP is struggling to recover, trading below its short- and longer-term moving averages after a sharp drop.
• The Euro is failing to hold gains from last week's European Central Bank rate hike, while a much higher UK rate keeps the Pound firm.
• UK inflation data on Wednesday and Thursday's Bank of England decision are the next tests.

EUR/GBP trades in the mid-0.8500s, unable to reclaim the 0.8600 barrier on Tuesday as the Euro (EUR) has struggled even after the European Central Bank (ECB) raised its three key rates by 25 basis points (bps) on September 10, lifting the deposit rate to 2.50%.

Tuesday's German and Eurozone ZEW sentiment surveys did not help, with the Eurozone economic sentiment gauge falling well short of forecasts.

The Pound is holding firm despite a soft United Kingdom (UK) jobs report. Claimant Count claims rose far more than expected in August and employment growth slowed over the three months to July, yet the wider draw for Sterling is the rate gap.

The next test will be Wednesday's UK inflation report, where headline annual inflation is seen edging up to 3.1% from 2.9%, with services prices still hot. A read at or above forecast would keep the BoE's hawkish minority in play and give the Pound another reason to hold, pressing EUR/GBP back toward the lower end of its range.

The Bank of England follows on Thursday and is widely expected to leave rates unchanged, so the vote split and guidance will matter more than the decision itself.

Short-term technical analysis:

On the 4-hour chart, EUR/GBP trades at 0.8558, keeping a bearish near-term tone as it holds below both the 20-period and 100-period Simple Moving Averages (SMAs) at 0.8572 and 0.8575. A dense band of nearby overhead levels between 0.8559 and 0.8575 suggests rallies are likely to meet supply, while the Relative Strength Index (RSI) slipping toward 35 hints at persistent, though not yet extreme, downside pressure.

On the topside, immediate resistance sits at 0.8559, followed by horizontal barriers at 0.8562 and 0.8565, before the 20-period SMA at 0.8572 and the 100-period SMA at 0.8575 reinforce a broader capping zone. On the downside, initial support comes in at the recent horizontal floor near 0.8554, where a break would expose lower levels and extend the current corrective phase.

(The technical analysis of this story was written with the help of an AI tool. Know more.)