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EUR/GBP Retreats From 0.8590 Support After Positive UK Employment Data; Attention Turns To German/EU ZEW Data
EUR/GBP accepts bids to reverse the early-day retracement from a five-week-old ascending support line. Employment Change in the UK decreases, the Unemployment Rate rises, but Average Earnings increase. Cross-currency pair traders are stimulated by the market's cautious optimism and the European markets' holidays. German and Eurozone ZEW Surveys for August will be crucial for intraday direction, but Wednesday's UK inflation will be the determining factor.
EUR/GBP falls 25 points to a new intraday low near 0.8585 as the European session begins on Tuesday. In doing so, the cross-currency pair draws cues from the optimistic UK average earnings while paying some attention to the dismal employment change and unemployment rate figures as reported by the UK National Statistics.
In the most recent UK employment report, the headline Employment Change figure for June was -66K, compared to 50K expected and 102K previously, while the ILO Unemployment Rate jumped to 4.2% for the three months leading up to June, despite market expectations that it would remain unchanged at 4.0%.
Importantly, Average Earnings, including and excluding bonuses, for the three months leading up to June improve substantially, bolstering hawkish expectations from the Bank of England (BoE), which appears to have weighed down the EUR/GBP exchange rate.
According to Reuters, the UK's Chartered Institute of Personnel and Development (CIPD) released details of their latest survey on Monday, revealing that human resources executives expected to increase basic pay rates by a median of 5% – the same as the previous two quarters and the joint-highest readings since the survey's inception in 2012. The news increases the hawkish bias towards the BoE following the optimistic UK growth figures released last week.
In contrast, Germany's Wholesale Price Index (WPI) for July inched up to -2.8% YoY from -2.9% in previous measurements, but fell short of expectations of -2.6%. Nonetheless, the monthly WPI figures reprinted the -0.2% MoM numbers as opposed to market predictions of -1.4%.
According to Reuters, the German Economy Ministry stated, in response to the data, that current early indicators do not point to a sustainable economic recovery in the future months. However, the report also indicates that the expected cautious recovery in private consumption, services, and investment is exhibiting the first signs of optimism, which are likely to grow stronger as the year progresses.
Notably, the EUR/GBP price is supported by the Euro's ability to cheer the US Dollar's retreat from a five-week high, particularly prior to the mid-tier sentiment numbers from the ZEW Institute. Moving forward, the ZEW Economic Sentiment figures for Germany and the Eurozone will be indispensable for establishing direction.
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