EUR/GBP has compressed into a symmetrical triangle since mid-August and now sits right at its apex near 0.8569. A hawkish European Central Bank stands against a Bank of England sending mixed signals, and the pair looks primed for a decisive break in either direction.
EUR/GBP is coiled at 0.8569, exactly where a descending trendline from the 0.8587 highs meets an ascending trendline off the 0.8480 lows — and where the 100-period EMA also sits. Two weeks of compression have brought the pair to this point.
ECB hawkishness keeps building
The euro is closing out August with real momentum, having climbed to $1.1697 against the dollar, its strongest level in three months. French and Spanish inflation both surprised to the upside, with Spain's harmonised reading hitting 4.5%, its highest since 2023. As a result, markets now expect the ECB deposit rate could climb to 2.80% by next March, from 2.25% currently. A September hike is now seen as roughly 60% likely.
Bank of England sends mixed signals
Sterling, however, faces an awkward domestic backdrop. The Bank of England's July decision was a 6-3 hold, with three members pushing for a rate hike, yet Governor Bailey used his press conference to close the door on near-term hike bets anyway. UK inflation eased to 2.9%. The labour market, however, cooled more sharply than expected, with private-sector wage growth hitting its softest pace since 2020. The result is an ECB gaining conviction toward further tightening against a Bank of England caught between growth resilience and a weakening jobs picture.
Levels to watch on the triangle break
Should buyers push above the descending trendline, the path opens toward a retest of the 0.8587 highs, the level marking the origin of the recent pullback. A confirmed breakout there would signal bullish continuation for the euro.
A break below the ascending trendline and the 100-period EMA instead would expose the 0.382 retracement near 0.8536. A deeper slide would risk a retest of the 0.5 level around 0.8521.
Source: ActionForex
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