EUR/GBP signal: Rising wedge forms after UK autumn statement

The EUR/GBP exchange rate remained in a consolidation phase on Thursday as traders reflected on the encouraging economic data from Europe. They also reflected on the latest UK autumn statement. The pair was trading at 0.8700, lower than this week’s high of 0.8767.

Encouraging UK and EU PMIs

The EUR/GBP pair remained in a tight range after the latest European and UK services and manufacturing PMI data. According to S&P Global, the flash manufacturing PMI rose to 46.7 in November, higher than the median estimate of 45. This figure is a sign that the sector is still contracting.

The services sector, which accounts for the biggest part of the economy, rose to 50.5 while the composite PMI jumped to 50.1. These numbers mean that the British economy is doing modestly better than expected.

The same is happening in the euro area. In Europe, the services PMI improved to 48.2 while the manufacturing figure rose to 43.8%. The composite PMI came in at 47.1. All these figures are much higher than what economists were expecting. It is a sign that the bloc’s economy has bottomed. 

The EUR/GBP pair also reacted to Jeremy Hunt’s autumn statement in which he delivered some tax cuts. This statement pushed more investors to anticipate just two interest rate cuts in 2024. As a result, gilts retreated, with the yield of the two-year government bond moving to about 4.75%.

Looking ahead, there will be no major catalyst for the EUR to GBP pair in the coming days. The only important data to watch will be the upcoming UK consumer confidence report and the German GDP.

Watch here: https://www.youtube.com/embed/LlEdtW2rEMg?feature=oembed

EUR/GBP technical analysis

EUR/GBP chart by TradingView

The daily chart shows that the EUR/GBP exchange rate has drifted upwards in the past few weeks. It has remained above the 50-day moving average, which is a positive sign. At the same time, it has formed a rising wedge pattern, which is usually a bearish signal.

The price is sitting at an important level, which was the highest point on June 20th. Therefore, because of the rising wedge, the outlook for the pair is bearish, with the next key level to watch being at 0.8500. This target is estimated by measuring the distance between the beginning of the wedge.

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