EUR/GBP: Bears take charge below prior day's close, breakout on the cards

EUR/GBP is trading at 0.8537 at the time of writing, down 0.14% on the day and between a low of 0.8528 and a high of 0.8562. The price is below the prior day's close and has carved out dynamic support and resistance in an hourly time-frame perspective. 

Meanwhile, the pound was the main focus of the cross this week so far. Sterling hit a new 5-week high against the dollar and a 3-week high to the euro on Tuesday, supported by labour market data that showed the total number of payrolled employees in Britain has climbed to pre-pandemic levels.

UK data in focus for EUR/GBP

UK employers added a record 241,000 staff to their payrolls last month. This means the total number of payrolled employees is just above the level they were before the initial COVID-19 lockdown last year. Investors have cheered the prospects for Britain's job market as the government phases out its furlough support programme, which will finish on Sept. 30.

Inflation data was the next catalyst ahead of Retail Sales data. British inflation hit a more than nine-year high last month, lifting prospects that the Bank of England could act sooner to hike rates.

''Consumer prices in Britain rose by 3.2% in annual terms last month. This was the biggest monthly jump in the annual rate in at least 24 years, largely due to a one-off boost reflecting the "Eat Out to Help Out" scheme that pushed down restaurant meal prices last year,'' Reuters reported. 

Economists and the  Bank of England expect inflation to rise sharply this year and hit a peak of 4% which means the central bank could be on course to tighten its monetary policy quicker than the European Central Bank or the US Federal Reserve. A Reuters poll found that investors believed the BoE will raise borrowing costs by the end of 2022.

Eyes on Retail Sales 

The next focus for GBP will be tomorrow’s release of August Retail Sales. 

''This is expected to bounce by 0.8% m/m after the -2.4% m/m plunge registered in July,'' analysts at Rabobank explained. 

''That number prompted speculation that much of the lockdown related pent up demand in the UK has run its course. Tomorrow’s data will likely be key in setting that tone ahead of the September 23 BoE policy meeting.''

EUR/GBP technical analysis

EUR/GBP is on the verge of a downside breakout of the dynamic trendline support following a double top and a 50% mean reversion of the prior bearish impulse.