Market Analysis

Downward extension of EUR/GBP approaching 0.8550; attention drawn to UK employment data

Amos Simanungkalit · 12 Aug 20247.1K Views

The EUR/GBP pair continues to slide, reaching near 0.8550 during the early European session on Monday. The Euro (EUR) weakens amid growing expectations that the European Central Bank (ECB) will conclude its easing cycle sooner than previously anticipated. Meanwhile, traders are awaiting the UK employment report due on Tuesday for new market catalysts.

Bloomberg economists predict that the ECB may cut its deposit rate quarterly through the end of next year. This sooner-than-expected series of rate cuts is adding selling pressure on the Euro against the Pound Sterling (GBP). According to a Bloomberg survey, the ECB's benchmark rate is expected to decline to 2.25% by December 2025, following six consecutive quarter-point reductions. This forecast is an adjustment from earlier predictions, which placed the rate at this level by the second quarter of 2026.

On the GBP side, traders are anticipating two more rate cuts from the Bank of England (BoE) in 2024. The upcoming monetary policy meeting on September 19 has a market-implied probability of 40% for a rate cut. The UK labor market data, expected on Tuesday, could provide further insight into the UK's economic outlook and the BoE's future rate decisions.

The UK unemployment rate is projected to increase to 4.5% in June. Average weekly earnings, excluding bonuses, are expected to slow to 5.4% year-on-year for the three months ending in June. Including bonuses, total earnings are anticipated to decline to 4.6% year-on-year. This slower wage growth may keep the BoE in easing mode, potentially limiting the GBP's strength and capping the downside for the EUR/GBP pair.