The EUR/GBP cross is trading with a mild negative bias, hovering around 0.8310 during the early European session on Thursday. Market participants are awaiting the release of the Eurozone’s third-quarter Gross Domestic Product (GDP) data later in the day, alongside speeches from Bank of England (BoE) Governor Andrew Bailey and European Central Bank (ECB) President Christine Lagarde, which could provide fresh direction for both currencies.
A recent increase in the UK Unemployment Rate to 4.3% for the three months ending in September has weighed on the Pound Sterling (GBP), exceeding analysts’ expectations. The rise in unemployment is leading some market observers to speculate that the BoE could cut rates at its next meeting. “The higher unemployment rate could prompt markets to price in a greater chance of a rate cut from the Bank of England next month,” noted analysts at XTB.
However, BoE Chief Economist Huw Pill has remained cautious, highlighting that wage growth in the UK continues to run at elevated levels, which is “hard to reconcile with the UK inflation target.” Pill acknowledged the progress in reducing inflation but emphasized that it has not yet reached the central bank‘s desired target, suggesting that the BoE may not ease monetary policy quickly despite the weak labor market data. These hawkish remarks are likely to cap further downside for the Pound in the near term. Traders will be watching Bailey’s speech later today for further clues about the BoE’s rate policy.
On the Eurozone front, ECB policymaker Olli Rehn stated earlier this week that the central bank is expected to implement additional rate cuts, potentially bringing the deposit rate to a neutral level by the first half of next year. The expectation that the ECB may deliver more aggressive rate cuts than the BoE has put pressure on the Euro (EUR), which could continue to face headwinds in the short term. Markets have already priced in a 25 basis point (bps) rate cut, with a nearly 20% chance of a larger 50 bps move.
As both the BoE and ECB prepare to make key announcements, investors will closely monitor speeches from both Bailey and Lagarde later on Thursday for further guidance on their respective monetary policies.
Related Topics:
