EUR/GBP attracts some buyers around the mid-0.8600s following the UK wage inflation data, eyes on ZEW survey
- EUR/GBP trades with modest gains near 0.8648 following the UK wage inflation data.
- UK’s Average Earnings, excluding bonuses, came in at 7.8%, while the gauge including bonuses climbed 8.1% vs. 8.5% prior.
- ECB's chief economist said they will keep interest rates high until inflation returns to 2%.
- Investors will monitor the ZEW Economic Sentiment Survey for October, ECB's De Guindos speech on Tuesday.
The EUR/GBP cross posts modest gains around the mid-0.8600s during the early European session on Tuesday. The recovery of the cross is supported by the mixed UK wage inflation data. The cross currently trades near 0.8648, up 0.05% on the day.
The latest data from the UK’s National Statistics revealed on Tuesday that the UK’s Average Earnings, excluding bonuses, came in at 7.8% 3Mo/YoY August from the previous reading of 7.8% and 7.8% expected. The gauge including bonuses climbed 8.1% 3Mo/YoY versus 8.5% prior and below the market consensus of 8.3%.
On Monday, the Bank of England (BoE) Chief Economist Huw Pill said that the central bank has done a lot on interest rates. He further stated that if the economy has a persistent component of inflation, BoE will need a persistent monetary policy response. Additionally, BoE Governor Andrew Bailey said on the weekend that rising borrowing costs were affecting the housing market and employment. He indicated that interest rates will likely remain around the current 5.25%, given that restrictive policy is required to return inflation to 2%.
On the Euro front, the European Central Bank (ECB) President Christine Lagarde told euro-area finance ministers that the ECB is monitoring energy prices and the Israel-Hamas conflict for inflation risks. , ECB's chief economist Philip Lane said in an interview that the ECB will keep interest rates high until inflation returns to 2%, but this may take some time.
Looking ahead, market players will focus on the ZEW Economic Sentiment Survey for October and ECB's De Guindos speech later on Tuesday. On Wednesday, UK Consumer Price Index (CPI) data and ECB’s President Lagarde speech will be closely watched events. These events could give a clear direction to the EUR/GBP cross.