Trying to Sell the EUR/GBP After UK and Eurozone Economic Data


EUR/GBP has been on a downtrend since the start of 2021, with GBP significantly stronger than the EUR. GBP/USD made bigger gains than EUR/USD during the bullish period following the start of the pandemic, until last summer, and since then EUR/USD has become more bearish than the cable. This shows that the GBP has had the upper hand, although the situation in Europe and the UK remains similar, both politically, regarding the coronavirus, and economically.

Meanwhile, the moving averages have done a good job of providing resistance on the daily chart at higher retracements. Initially, it was the 20 SMA (grey), then the 100 SMA (green), and towards the end of last year, the 200 SMA took over this work, showing that the pace of the trend was slowing down.

However, since the beginning of this year, the decline has accelerated again, with EUR/GBP print new lows. We saw a jump for two days after the European Central Bank met two weeks ago when it suggested tightening monetary policy, but the Bank of England also seemed hawkish as inflation continues to rise. grow everywhere. Today’s CPI (consumer price index) inflation in France showed stagnation for January, so hopefully the surge will stop soon. Today’s UK retail sales for January were quite strong, as shown below, which should keep the GBP well-priced.

UK retail sales report in January

  • January retail sales MoM +1.9% vs +1.0% expected
  • December sales were -3.7%; revised to -4.0%
  • Retail sales over one year +9.1% vs. +8.7% expected
  • Year-over-year prior sales -0.9%; revised to -1.7%
  • Core retail sales (excluding fuel) MoM +1.7% vs. +1.2% expected
  • Prior MoM base sales were -3.6%; revised to -3.9%
  • Core retail sales (excluding fuel) YoY +7.2% vs. +7.9% expected
  • Year-over-year prior base sales -3.0%; revised to -3.8%

After the impact of omicron in December, retail sales activity picked up to start the new year with sales volumes for non-food stores up 3.4% on the month. This was offset by grocery store sales volumes falling below pre-pandemic levels for the first time (0.8% below February 2020 levels). Overall, retail sales volumes were 3.6% above pre-pandemic levels, i.e. February 2020.

The data only reaffirms a rebound in economic activity, which is to be expected after the December hit, amid the spread of the omicron variant at the time. Economic conditions, in general, should continue to support the BOE’s narrative to tighten monetary policy in the months ahead.

The euro zone construction output report turned negative again in January, showing that this sector remains in contraction. In fact, the annualized numbers show that construction production has been declining for the whole of 2021. As a result, EUR/GBP remains bearish and we are looking to open a sell signal soon, so follow our Forex Signals page in direct for business ideas.

Eurozone construction output in December

  • January retail sales MoM +1.9% vs +1.0% expected
  • December sales were -0.2%
  • Year-on-year construction output -3.9%
  • Previous production +0.5%; revised to +0.4%

It’s quite the slump in construction activity, with Austria (-8.1%), Germany (-7.3%) and France (-7.0%) being the main culprits . Overall, building construction fell 4.5% over the month, while civil engineering construction fell 1.9% over the month.

EUR/GBP

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