Touches Lowest Level Seen Since Mid-Dec

EUR/GBP touched the lowest level seen since mid-December as the feedthrough from a post-UK CPI unwind of some of the cuts priced into UK STIRs outweighed the impact of continued pushback from the ECB re: the degree of cuts priced into EUR STIR markets (the degree of the move seen in UK STIRs also outstripped the move in EUR STIRs).

• EUR/GBP shows as low as GBP0.8583. Technically, the pair remains in consolidation mode, although our technical analyst warns that a short-term bear threat is present and the cross is trading closer to its recent lows. The break of the 50-day EMA earlier this month strengthens the bearish theme and a resumption of the bear cycle would expose the Dec 15 low (GBP0.8571). That average protects key support at the Dec 11 low (GBP0.8549). Key resistance is still seen at the Dec 28 high (GBP0.8715), with the 50-day EMA (GBP0.8638) presenting the initial firm resistance to watch.