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EUR/GBP continued correction towards 0.85000

Consumer price inflation (CPI) in the UK exceeded the central bank’s target of 2% for the first time in almost two years in May. CPI accelerated to 2.1 percent in May from 1.5 percent in April. That was above the economists’ forecast of 1.8 percent and exceeded the Bank of England’s goal for the first time since July 2019.

The central bank predicted that inflation would temporarily rise above the target and return to 2 percent next year.
As companies increased prices more than expected after reopening after the completion of the COVID19 lock, CPI inflation is likely to rise to a peak of 2.9 percent later this year, said Paul Dales, an economist at Capital Economics.
The monthly growth of consumer prices was maintained at a stable level of 0.6 percent, while it was predicted to decrease to 0.3 percent. The movement of prices of clothes, motor fuel, and recreational and cultural goods were the main reasons for the higher monthly rate this year than a year ago.

House price growth in the UK slowed in April for the first time since mid-2020, the National Statistics Office said on Wednesday. Average house prices rose 8.9 percent year-on-year in April, slower than the 9.9 percent raise. It was estimated in March. The inflation rate has slowed for the first time since July 2020.

Hourly labor costs in the Eurozone increased by 1.5 percent on an annual level, much slower than the increase of 2.8 percent recorded in the fourth quarter of 2020. Average hourly labor cost growth slowed in the first quarter, and wage growth is expected to remain subdued over the coming years, said Jack Allen-Reynolds, an economist at Capital Economics. This will maintain the basic inflationary pressure.

EURGBP Looking at the chart on the daily time frame, we see that the Euro is under more pressure and that there is a possibility to reaffirm the previous low of 06 April. Following the Fibonacci level, for something like that, we need a break below 78.6% level at 0.85400. The pound is in a better position due to the vaccinations and the country’s opening to normal functioning. For the bullish option, if we first need support in moving averages MA20 and MA50, it would be great if the EURGBP pair crossed the 61.8% Fibonacci level to test the MA200 in the zone around 0.88000.

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