EUR/GBP extends lower near 0.8550, focus on UK jobs data
- EUR/GBP is trading in negative territory for the fourth consecutive day around 0.8550 in Monday’s early European session.
- Bloomberg economists see the ECB cutting its deposit rate once every quarter until the end of next year.
- UK labor market data on Tuesday will be in focus.
The EUR/GBP cross is extending its decline near 0.8550 during the first European session on Monday. The prospect of a rate cut ending sooner than previously expected by the European Central Bank (ECB) is pulling the Euro (EUR) lower. However, traders will monitor the UK jobs report for new catalysts, due on Tuesday.
The ECB is likely to cut its deposit rate once every quarter until the end of next year, according to Bloomberg economists. The expected rate cut earlier than before the ECB provides some pressure to sell the currency divided against the Pound Sterling (GBP). A Bloomberg survey of forecasters showed that the rate is expected to reach 2.25% in December 2025 after six straight percentage point declines. Earlier, respondents had estimated that this level would be reached in the second quarter of 2026.
In front of the GBP, traders are betting on two more cuts by the Bank of England (BoE) in 2024. The next monetary policy meeting is scheduled for 19 September, and the market sees a 40% chance of a cut. UK labor market data on Tuesday could provide clues about the UK economy and the rate hike path.
The UK unemployment rate is expected to top 4.5% in June. Average weekly earnings of old bonuses are expected to fall in the three months ended June to 5.4% YoY. Including bonuses, gross earnings are expected to decline 4.6%YoY. Slower than expected wage growth will keep the BoE in a dovish position, further depressing the GBP and closing the cross rate.
Pound Sterling Questions
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, responsible for 12% of all transactions, which is an average of $630 billion per day, according to 2022 data. Pairs its main trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or ‘Dragon’ as it is known to traders (3%), and EUR/GBP ( 2%). . The Pound Sterling is issued by the Bank of England (BoE).
One of the most important factors influencing the value of the Pound Sterling is the monetary policy made by the Bank of England. The BoE bases its decisions on whether it has achieved its main objective of “price stability” – a stable inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the BoE will try to stabilize it by raising interest rates, making it more expensive for people and businesses to get credit. This is generally positive for GBP, as high interest rates make the UK a very attractive place for global investors to park their money. When inflation drops too much it is a sign of economic growth slowing down. In this scenario, the BoE will consider lowering interest rates to reduce debt so that businesses will borrow more money to invest in growth projects.
Data updates measure the health of the economy and can affect the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it can encourage the BoE to set interest rates, which will directly strengthen the GBP. Otherwise, if the economic data is weak, the Pound Sterling may fall.
Another important data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country receives from imports and what it spends on imports over a period of time. If a country produces a commodity that is in high demand, its currency will only benefit from the increased demand created by foreign buyers who want to buy this commodity. Therefore, a net positive Trade Balance strengthens the currency and vice versa for a negative balance.
#EURGBP #extends #focus #jobs #data