Despite some important macro data from the UK and the eurozone, the EUR/GBP cross showed little desire to move, and it traded unchanged ahead of the US session, hovering near 0.8345.
UK jobs update
Earlier today, the latest data from the UK Office for National Statistics showed that real pay for workers fell for the second month in a row as wage rises were not enough to offset the rising inflation.
Without bonuses, nominal earnings rose just 4% yearly, while wages jumped to 5.4% from 4.8% previously with bonuses.
Additionally, the unemployment rate improved slightly, printing 3.8%, down from 3.9% previously. The ONS’s labor force survey measure of employment rose by 10,000 in the three months to February, but the increase was less than the 52,000 analysts expected.
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Laith Khalaf, head of investment analysis at AJ Bell, said the pay data was the “calm before the inflationary storm” with implications for the broader economy.
The Bank of England does not seem to have managed to dampen the market’s rate hike expectations. Consequently, the British pound is at risk of suffering a significant fall, economists at Commerzbank report.
So as long as the economic weakening is not reflected in the data, the market will probably continue to bank on the BoE, hiking its key rate from the current 0.75% to above 2% by the end of the year due to high inflation levels.
“We see the risk of the market having to lower its rate hike expectations, which is likely to put pressure on sterling.”
Negative macro data in Europe
Meanwhile, in Europe, the German wholesale price index, which shows the change in the price of goods sold by wholesalers, rose from 16.6% to 22.6% yearly, while the monthly base quadrupled from 1.7% to 6.9%. Still, for ECB, that does not mean anything as the central bank is not expected to raise rates anytime soon.
Furthermore, according to the latest ZEW Survey, the economic sentiment in the eurozone fell further to -43 in April, down from -38.7 in March. German ZEW surveys also showed more weakness amid catastrophic inflation and the conflict in Ukraine.
The recent spike in the EUR/GBP price to the 200-day average was quickly sold, bringing the cross into the territory of no one – between 0.85 and 0.83. As long as the price remains here, the medium-term outlook seems neutral, and traders must decide which way to push the price.