The EURGBP exchange rate is testing key yearly resistance ahead of a speech from ECB President Christine Lagarde.
EURGBP – Daily Chart
The EURGBP pair has hit resistance at the 0.8736 level, marking the third attempt to breach this area since April. If the test fails, a strong correction could occur, with support at 0.8600 coming first.
The European and British economies will release a mix of data on Friday, but it shouldn’t significantly alter the pair. HCOB PMI data confirms the numbers for September that were released earlier.
Producer prices for Europe could gain more significance at 1 pm HKT, ahead of a speech by ECB President Christine Lagarde at 1:40 pm HKT. Lagarde has spoken publicly about the European economy lately, but there may be something for markets to digest.
Lagarde recently said that a year ago, most would have expected that U.S. tariffs “would trigger a major adverse shock to the euro area economy”. However, “some of these assumptions have not been borne out,” she added.
The impact on inflation and growth had been “relatively moderate”, and interest rates were in a “good place”.
“The risks to inflation appear quite contained in both directions,” Lagarde said in another speech. “We are well placed to respond if the risks to inflation shift or if new shocks emerge”.
The euro reaching a key resistance level has the potential for a recovery in the British pound if buyers become hesitant at these levels.
The UK economy is having problems with stubborn inflation, rising food prices, and a stagnant economy. At the end of October, the EUR/GBP will start to process November’s government budget, which could be tough for businesses and taxpayers.
