EUR/GBP Rises on Easing UK Wage Growth
EUR/GBP Analysis
Markets appear to cheer today's wage data from the UK, since pay growth eased further to 5.6% in the November-January period, marking the slowest pace in more than a year. The historically high wages gave been a constant headache for the BoE as they make controlling inflation harder. Their deceleration may help the Bank of England towards a pivot, putting pressure on the Pound. The Euro meanwhile finds support from last week's policy decision, as President Lagarde did not entertain rate cut talks during her press conference and stressed that "we're not there yet" in terms of inflation [1]
After narrowly avoiding new 2024 lows, EUR/GBP rebounds this week, with the help of the aforementioned developments. This gives it the opportunity to take another crack at the pivotal 38.2% Fibonacci of the last leg down, but we are cautious around further gains, as the upside is unfriendly from a technical prospective.
A series of comments from ECB officials that hinted to rate cuts within the summer, following last week's policy decision and the lower inflation forecasts don't bode well for the Euro [1]. The Bank of England may have implied peak rates [2], but has more work to do on inflation, despite progress. Its European counterpart is closer to a pivot, so the policy differential remains unfavorable for EUR/GBP. It has already rejected the 38.2% Fibonacci, below of which (and the EMA200) the bearish momentum is intact. As such, there is still risk for a test of 0.8491, although sustained weakness below it has a higher degree of difficulty.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 12 Mar 2024 https://www.ecb.europa.eu/press/pressconf/2024/html/ecb.is240307~314650bd5c.en.html | |
| Retrieved 27 Apr 2024 https://www.bankofengland.co.uk/monetary-policy-report/2024/february-2024 |
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