EUR/GBP keeps the bid tone near 0.8530

• EUR/GBP bounces off earlier lows near 0.8490.
• UK Retail Sales surprised to the downside in December.
• EMU’s final December CPI matched the preliminary readings.

The now offered tone around the quid is encouraging EUR/GBP to rebound from earlier lows in the 0.8490/85 band and move to the 0.8530 region, or daily highs.

EUR/GBP up on GBP-selling

After hitting fresh weekly lows near 0.8480, the European cross sparked a correction higher sponsored by the increasing selling mood around the sterling, particularly after UK Retail Sales missed expectations in December and in response to the persistent demand for the greenback.

Indeed, headline sales contracted at a monthly 0.6% while Core sales dropped 0.9% inter-month. These results added to the ongoing pessimism surrounding the currency following below-consensus inflation figures during last month (out on Wednesday) as well as rising market chatter regarding the possibility that the ‘Old Lady’ could reduce the refi rate any time soon.

On this side of the Channel, final December inflation figures in the broader Euroland matched the preliminary prints: headline CPI rose 1.3% YoY and Core CPI gained 1.3% from a year earlier.

Later in the NA session, the US housing sector will be in the limelight in the first turn, followed by Industrial/Manufacturing Production figures and the flash U-Mich gauge.

What to look for around GBP

GBP remains under pressure in response to recent poor domestic data and unremitting rumours of a BoE rate cut at some point in the short-term horizon. In addition, the currency is expected to remain under pressure in the next months, as economic and political uncertainty are predicted to re-emerge after the Brexit deadline on January 31^st. Furthermore, extra effervescence between the EU and the UK is almost priced in, particularly when comes to negotiations on the trade front.

EUR/GBP key levels

The cross is gaining 0.12% at 0.8523 and faces the next hurdle at 0.8595 (2020 high Jan.14) seconded by 0.8663 (100-day SMA) and finally 0.8779 (200-day SMA). On the flip side, a breakdown of 0.8487 (weekly low Jan.17) would expose 0.8454 (2020 low Jan.8) and then 0.8275 (2019 low Dec.13).