EUR/GBP. Analysis and Forecast

[Redator]

Today, the pair is in consolidation, trading above the 0.8675 level. The euro is attempting to strengthen following a report from the German Ministry of Finance, which announced that tax revenues collected by the federal and state governments rose by 2.6% year-on-year in September. At the same time, the ministry emphasized that in the near future, tax receipts are unlikely to receive additional support from economic momentum.

Europe's largest economy contracted again in 2024, marking the second consecutive year of decline, and the government projects only 0.2% growth in 2025. The report notes that leading indicators do not point to any significant improvement in the economic situation in the short term, according to Reuters.

Nevertheless, the euro is facing headwinds, as the downgrade of France's credit rating by S&P Global Ratings has altered risk assessments. S&P cut the country's rating from AA– to A+, citing increased fiscal uncertainty despite the government's approved 2025 budget plan.

The EUR/GBP rate is likely to decline again, as the British pound could gain support from the Bank of England's cautious policy stance, given the persistent inflation in the United Kingdom.

For better trading opportunities, traders should pay attention to the upcoming release of the UK Consumer Price Index (CPI) and retail sales data on Wednesday. These reports will help clarify the Bank of England's next steps regarding potential interest rate cuts before the end of the year. Moreover, Bank of England Governor Andrew Bailey has previously emphasized that the inflation situation in the country remains unstable.

At the same time, the latest UK labor market data for the three months ending in August show a slowdown in wage growth and a rise in unemployment, increasing the likelihood of another rate cut by the end of the current year.

From a technical perspective, the Relative Strength Index (RSI) on the daily chart is neutral. Prices remain below the 9-day EMA, indicating that the bulls lack upward momentum. The cross encountered resistance near the psychological level of 0.8700, while support was found near the 50-day SMA at 0.8675. A move below this level would bring the next support into view at 0.8655, beneath which lies the 100-day SMA — a key pivot point, signaling that bulls have completely lost strength if broken.

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