EURGBP continues to consolidate at the 0.8550 lows, with traders confused about the next path.
EURGBP: Daily Chart
EUR/GBP is trading at 0.8554, with some key levels in the way of a price low. A close above the 0.8580 level can start a new upward trend.
German inflation is released tomorrow, but it is a final reading of price data and may not stray far from the expected 6.4%. That is still higher than last month’s 6.1% and highlights pressures on the German economy, which recently slipped into a recession.
The more important release will be the United Kingdom’s latest employment figures, and analysts expect to see 125k jobs added, which would be half of last month’s 250k. However, the unemployment rate is expected to stay at 3.8%.
The employment data is important due to wage pressures on inflation, and Bank of England governor Andrew Bailey said he will not hesitate to continue with rate hikes if wages keep climbing.
He said the Bank is watching developments in the economy, “in particular those in the labour market, in wage growth, and in service price inflation, to assess whether pressures are proving more persistent”.
The central bank shocked markets last month with another 50-basis point increase and said “further tightening in monetary policy would be required” if wage and service inflation failed to slow from current levels.
“Over the last twenty months, we have raised the Bank Rate by nearly five percentage points. Some of that tightening is still to come through the policy pipeline,” he said.
Tomorrow’s job market figures are expected to show wage growth slowing to 7.1% in the three months to May, down from 7.2% in the previous quarter. Despite a drop, it will still be one of the highest levels since the UK’s statistics office started recording the data in 2001.
Economists now expect to see another 50 basis point increase at the MPC’s next meeting on August 3.
Another release tomorrow will be European and German economic data, where Germany’s sentiment among economists is expected to slip again to -10.5 but is still higher than -53.8 a year ago.
