EUR/GBP surges following Eurozone PMIs

The EUR/GBP pair saw a 0.25% increase in Monday’s trading, trading at 0.8560, gaining 0.25% and moving towards the 20-day Simple Moving Average (SMA) at 0.8565.

Despite pressures from a stagnant Euro Area economy and anticipations of the ECB’s rate cut, the daily chart indicates buyers’ dominance. However, hourly indicators suggest a possible pullback as bulls were rejected near overbought territory.

The Hamburg Commercial Bank’s PMIs from January were revised upwards, giving some traction to the EUR but still remaining in contraction territory. This situation may push the ECB to initiate a rate cut by June 2024, assuming economies continue to weaken.

The UK economy shows signs of potential firmness, with the Bank of England shifting from assessing the need for restrictive monetary policy to sustaining the current stance. Markets anticipate around 100 bps of rate cuts for 2024, moderated due to expected fiscal amendments.

On the ECB front, markets expect between 125 and 150 bps of easing in 2024, which may limit upward movements by the cross. The Relative Strength Index (RSI) is showing a positive gradient, suggesting a potential shift towards an upward trend as bulls conquer additional ground.

The hourly chart shows a more complicated scenario for bulls, with the RSI showing a downward slope within positive territory, indicating some selling momentum.