EUR/GBP Exchange Rate Holds Above 0.8700 After Weak German Data

The EUR/GBP exchange rate remained resilient in European trading, holding gains above the key 0.8700 level even after unexpectedly weak German Industrial Production data. In the London session, EUR/GBP traded around 0.8725 (+0.3% vs the prior close), supported by technical demand around the 0.8700 psychological floor. Technicals point to a short-term test of upside resistance. EUR/GBP approached the 50-day moving average near 0.8732. RSI was about 58, suggesting moderate bullish momentum without overbought conditions. Liquidity/order-flow indicators showed clustered buy orders around 0.8700, with institutional interest (not retail-led) helping EUR/GBP exchange rate remain supported. Fundamentals diverged from the usual playbook. German Industrial Production fell 1.6% m/m in January (vs a 0.5% expected decline), and annual output contracted 5.5% with the 11th consecutive month of declines. Sector pressure was broad, including capital goods, intermediate goods, consumer goods, and construction. Yet EUR/GBP exchange rate still rose, helped by: (1) euro weakness already being priced in (“sell the rumor, buy the fact”); (2) relative Eurozone performance not collapsing beyond Germany; and (3) an interest-rate differential, with money markets pricing ECB cuts (~75 bps) versus more cuts for the Bank of England. Risk sentiment also improved. European equities were firmer, and VIX eased to around 13.5, a backdrop that typically supports carry trades where the euro can act as a funding currency. COT data showed leveraged funds increased net short positions in EUR/GBP futures, creating conditions for a squeeze when price failed to drop after the data. Traders now watch 0.8732 (resistance). A clean break could open 0.8760. Support is 0.8700, then 0.8675 if the bounce fades.