EUR/GBP drops to session low and rebounds after UK CPI

The EUR/GBP accelerated its reversal move from Monday's two-month high and dropped to 0.8760 level after upbeat UK CPI print.

According to the data release just a short while ago, UK consumer inflation, as measured by CPI, rose to an annualized pace of 1.6% in December. The reading surpassed consensus estimates pointing to a rise to 1.4% from previous month's reading of 1.2%. 

The cross, however, has managed to rebound around 20-pips from session low and was last seen trading around 0.8780 region as market seemed disappointed from a slight miss in the PPI figures. 

Meanwhile, investors also seemed reluctant to place fresh bets ahead of the keenly awaited Brexit speech by UK Prime Minister Theresa May, which might continue infusing volatility across GBP crosses. 

Technical levels to watch

A follow through retracement could get extended towards 0.8750 support below which the cross is likely to accelerate the slide towards 0.8725-20 support ahead of 0.8700 handle.

On the upside, 0.8800 handle now becomes immediate resistance, which if cleared seems to assist the cross back towards 0.8850 resistance area (yesterday's high).