EUR/GBP surges following Eurozone GDP data

On Tuesday, the EUR/GBP pair rose by 0.50% to hit 0.8565. The Q4 GDP numbers for the Eurozone exceeded expectations, but the daily chart clearly shows bearish weariness. As monetary policy differences with the European Central Bank have pushed the cross lower in the previous sessions, the Bank of England’s decision on Thursday is predicted to push the cross lower as well.

In Q42023, the Eurozone economy shrank but marginally beat market estimates, which helped to strengthen the EUR. The decline in loan demand and increase in interest rates caused a slowdown in investment spending. Wednesday’s January inflation data is expected to have an impact on expectations for the next ECB decisions.

From a technical perspective, the Relative Strength Index (RSI) indicates a decreasing downward momentum with a positive slope. A decrease in red bars on the Moving Average Convergence Divergence (MACD) indicates a decrease in selling pressure. Bearish momentum appears to be in control, though, given that the pair is positioned below the 20, 100, and 200-day Simple Moving Averages (SMAs).

With the RSI approaching the overbought zone and the MACD tapering red bars, indicating a waning of selling forces, the shorter four-hour chart indicates an increase in purchasing force.