The EURGBP currency pair continues to lose its ground for the third successive day, trading around 0.8350 in the European session on Tuesday. The EURGBP cross remains subdued following the release of the U.K. mixed employment data.
GBPUSD is sliding lower despite the UK jobs data coming out relatively positive – something which would normally have been expected to strengthen the Pound Sterling and elevate the Cable.
GBPUSD edged lower into the 1.3040s as a result of continued US Dollar strength, which comes from reduced bets the Federal Reserve will need to be as aggressive at slashing interest rates as previously thought.
The UK ILO Unemployment Rate fell to 4.0% in the three months leading up to August, down from 4.1% in July and below the market forecast of 4.1%. Employment Change for August saw a notable increase of 373,000, up from 265,000 in July.
Meanwhile, Average Earnings excluding Bonuses grew by 4.9% year-on-year for the same period, meeting expectations, but slightly below the 5.1% growth registered in July.
Traders will likely focus on a series of key economic data from the U.K., set to be released on Wednesday, including the Consumer Price Index (CPI), Producer Price Index (PPI) and Retail Price Index.
These data releases could influence the Bank of England’s policy outlook. However, BoE officials have indicated that they may resume rate cuts at the upcoming meeting in November.
In the Eurozone, France’s Consumer Price Index (CPI) fell by 1.2% month-on-month in September, following a 0.5% increase in August. This marks the sharpest monthly decline in prices since the series began in 1990.
Year-on-year, inflation rose by 1.1%, down from 1.8% in August, primarily driven by significant drops in energy prices and a slowdown in service costs.
In Spain, annual inflation stood at 1.5% in September, the lowest level since March 2021, down from 2.3% in the previous month. Monthly inflation decreased by 0.6% in September, as expected, while annual core inflation also fell by 2.4%.
According to the October Bank Lending Survey (BLS), euro-area banks noted the first negative impact of the European Central Bank’s interest rate decisions on their net interest margins since the end of 2022.
Meanwhile, the effects on volumes of interest-bearing assets and liabilities continued to be negative.
Across the Atlantic, the US Dollar gains support from increasing expectations that the Fed will avoid aggressive interest rate cuts, following a strong jobs report and concerns of sticky US inflation.
According to the CME FedWatch Tool, markets are currently pricing in an 88.2% probability of a 25-basis-point rate cut in November, with no anticipation of a larger 50 bps reduction.
On Monday, Federal Reserve Bank of Minneapolis President Neel Kashkari reaffirmed the Fed’s data-dependent approach. Kashkari reiterated familiar Fed policymaker views on the strength of the US economy, noting continued easing of inflationary pressures and a robust labor market, despite a recent uptick in the overall unemployment rate, per Reuters.
GBPUSD chart by TradingView
(Source: OANDA)
