EUR/GBP falls sharply to near 0.8600 ahead of UK CPI data
|- EUR/GBP drops swiftly to near 0.8600 ahead of UK Inflation data.
- BoE Broadbent warned that higher wage growth could keep interest rates higher for a longer period.
- ECB Villeroy signalled that the rate-tightening regime has come to an end.
The EUR/GBP pair corrects sharply to near the round-level support of 0.8600 in the late European session. The cross faces a sell-off as investors hope that the Bank of England (BoE) will stick to tight interest rates due to higher wage growth.
UK’s labour cost index is consistently falling due to declining demand for workforce amid higher interest rates by the BoE. In spite of easing wage growth each month, pay hikes are higher than what required to bring down the underlying inflation to 2%.
BoE Deputy Governor Ben Broadbent said on Monday that higher wage growth could allow the central bank to keep interest rates in the restrictive territory for a longer period. In the monetary policy announcement, BoE Governor Andrew Bailey emphasized on keeping interest rates higher for sufficiently longer to ensure the achievement of price stability.
Meanwhile, investors await the UK Consumer Price Index (CPI) data for November, which will be published on Wednesday at 07:00 GMT. As per the consensus, monthly headline inflation grew by 0.2% after remaining stagnant in October. The annual headline and core inflation are seen easing to 4.4% and 5.6% respectively.
More-than-anticipated decline in the UK price pressures would escalate discussions about rate cuts by the BoE sooner in 2024.
On the Eurozone front, interest rates by the European Central Bank (ECB) are seen reaching to an end amid a significant decline in inflation. ECB Villeroy signalled that the rate-tightening regime has concluded now and rate cuts are expected at some time in 2024.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.