EUR/GBP plummets to mid-0.8800s, lowest since May 2020

A sudden pickup in the British pound dragged the EUR/GBP cross to eight-month lows, around mid-0.8800s during the first half of the European trading s  |  20/01/2021 10:03
  • EUR/GBP witnessed some aggressive selling on Wednesday amid a strong pickup in the sterling.
  • The euro bulls remained on the sidelines ahead of the ECB monetary policy decision on Thursday.

A sudden pickup in the British pound dragged the EUR/GBP cross to eight-month lows, around mid-0.8800s during the first half of the European trading session.

Having repeatedly failed to capitalize on the attempted recovery this week, the cross witnessed aggressive selling on Wednesday and now seems set to resume its recent well-established bearish trend. The sterling remained unaffected by the imposition of more travel restrictions in the UK, instead got a lift following the release of hotter-than-expected UK consumer inflation figures.

According to the UK Office for National Statistics (ONS), UK headline CPI rose 0.6% YoY and 0.3% MoM in December. The readings well above the previous month's figures and surpassed consensus estimates. Adding to this, the core inflation (excluding food and energy items) arrived at +1.4% YoY during the reported month as against +1.1% booked in November and market expectations of +1.3%.

On the other hand, the shared currency struggled to benefit from a weaker tone surrounding the US dollar as investors seemed reluctant ahead of the ECB monetary policy meeting on Thursday. Bulls also refrained from placing fresh bets amid a delay in the COVID-19 vaccine rollout in Europe and the possibility for an extension of lockdown measures in Germany until February 15.

Meanwhile, the final version of the Eurozone CPI matched original estimates, with the headline figure coming in at -0.3% and the core gauge at +0.2% YoY rate for December. The data did little to move the euro or provide any meaningful impetus to the EUR/GBP cross. This, in turn, leaves traders at the mercy of the GBP price dynamics ahead of the key ECB event risk on Thursday.

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