EUR/GBP Gains Support Near 0.8680 As Attention Shifts To UK Employment

The EUR/GBP pair is constructing a base after reaching a support level near 0.8680 during the Asian session. The cross is attempting a recovery after two trading sessions of perpendicular selling.

Despite the Bank of England's (BoE) repeated announcements of interest rate hikes, the United Kingdom's inflation is not softening, boosting the value of the British pound. BoE policymakers have acknowledged that they underestimated the strength and persistence of UK inflation, which is still in double digits.

Last week, BoE Governor Andrew Bailey increased interest rates by 25 basis points (bps) to 4.5 percent. Significant factors that are accelerating inflationary pressures are labor shortages caused by early retirement and higher food price inflation.

In the future, British employment data will remain a focal point. Investors would like to know how much tighter the UK labor market is becoming. The consensus forecast for the three-month Unemployment Rate is for it to remain unchanged at 3.8%. Average Earnings excluding bonuses are anticipated to increase to 6.8% from 6.6% in the previous release. This could exacerbate inflationary pressures as increased household wealth would stimulate overall demand. It is anticipated that the Change in Claimant Count will decrease by 10.8K.

Investors remain focused on the preliminary Gross Domestic Product (GDP) data for the Eurozone. The market anticipates a stable growth rate and that the economy will avoid recession in the near future. Other than that, developments regarding interest rate guidance will continue. MNI reported on Monday that the European Central Bank (ECB) will likely raise critical interest rates once or twice more during the current tightening cycle.