EUR/GBP - Eurozone narrowly avoids recession as UK sees more progress on inflation

• Eurozone records zero growth in Q4
• UK shop prices rise at a slower pace in January
• EURGBP rebounds near 2023 lows

Economic data confirmed what we already knew earlier today, that the eurozone is not growing and its largest economy - Germany - is on the brink of technical recession.

The bloc as a whole could have already been in recession if the data came in as expected but as it turns out that was just avoided, barring any revisions in the coming months.

In reality, it doesn't really matter as a figure in line with expectations wouldn't have drastically changed the situation, just the definition of it. The blog is struggling for growth and that's unlikely to change any time soon. All the more reason why people are calling for an ECB rate cut in March as inflation continues to make its way back to target.

The UK on the other hand had some good news from the BRC shop price index, which fell to 2.9% in January from 4.3% in December. There was a slowdown in both food and non-food inflation which won't just come as a relief to households that have navigated a two-year cost of living crisis but also to the Bank of England which may go into this week's meeting a little more confidence that it's on track to return inflation to its 2% target.

A rate cut this week is too early but new projections may open the door to a rate cut in May if we continue to see progress on the inflation front.

EURGBP sell-off losing momentum

The euro is trading near last year's lows but it appears to be doing so with less momentum which doesn't offer much hope of a significant break lower.

EURGBP Daily

Source - OANDA

Both the stochastic and MACD histogram appear to be creating a divergence with price, making higher lows even as prices continued lower. Today's rebound came on the back of that and may suggest that, despite the 2023 lows being tested, it may be too soon for a breakout on this occasion.