Key Moments
- EUR/GBP trades around 0.8527, marking a fourth straight session of gains for the cross.
- Stronger-than-expected Eurozone and German ZEW sentiment readings lend support to the Euro.
- UK CPI and PPI releases on Wednesday are highlighted as the next key drivers for EUR/GBP.
Euro Advances as UK Fiscal Concerns Pressure Sterling
EUR/GBP strengthened on Tuesday as lingering worries about the United Kingdom’s fiscal trajectory weighed on the British Pound (GBP) following Andy Burnham’s appointment as Prime Minister. At the time of writing, the cross is trading near 0.8527 and is on track for its fourth consecutive daily gain.
Strategists at OCBC noted that Burnham’s confirmation as UK Prime Minister, along with his choice of John Healey as “the chancellor of the exchange, while unexpected, was seen as market-friendly.” However, they pointed out that Burnham “unsettled the gilt market by suggesting he would use ‘any flexibility’ within the UK’s fiscal rules,” which has added to investor concerns about the fiscal outlook.
In this context, OCBC assessed that “the recent EUR/GBP correction, which has taken the cross to its lowest level in a year, is close to running its course.” The bank stated it “continues to expect EUR/GBP to recover towards 0.87 over the coming months, in line with our broader view of a range-bound GBP,” and emphasized that while “higher energy prices raise the risk of additional rate hikes in Europe,” the Bank of England (BoE) “still appears less likely than its regional peers to tighten policy, limiting GBP upside.”
Eurozone Sentiment Data Underpin Euro Strength
The Euro (EUR) is also receiving support from better-than-forecast survey data. The Eurozone ZEW Economic Sentiment index climbed to 23.4 in July from 9.5 in June, surpassing the anticipated reading of 11.2. Germany’s ZEW Economic Sentiment Index also improved sharply, rising to 26.3 from 10.5, well above the consensus expectation of 18.
UK Labor Data Mixed as Focus Turns to Inflation
On the UK side, the latest labor market figures offered only limited backing to the Pound. Employment rose by 147K in the three months to May, following an earlier increase of 100 K. The ILO Unemployment Rate remained at 4.9%, slightly under the projected 5.0%.
Market participants are now looking ahead to the UK Consumer Price Index (CPI) and Producer Price Index (PPI) reports scheduled for Wednesday, which are viewed as the next key catalysts for EUR/GBP price action.
Pound Performance Against Major Currencies
The following table summarizes the British Pound’s (GBP) percentage moves against major currencies today. The data indicate that the Pound showed its strongest relative performance versus the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | — | -0.01% | 0.33% | 0.18% | 0.05% | -0.22% | 0.00% | 0.12% |
| EUR | 0.00% | — | 0.34% | 0.19% | 0.06% | -0.19% | 0.01% | 0.13% |
| GBP | -0.33% | -0.34% | — | -0.17% | -0.27% | -0.52% | -0.32% | -0.21% | -0.18% |
| JPY | -0.19% | 0.17% | — | -0.13% | -0.37% | -0.19% | -0.06% | |
| CAD | -0.05% | -0.06% | 0.27% | 0.13% | — | -0.25% | -0.05% | 0.06% |
| AUD | 0.22% | 0.19% | 0.52% | 0.37% | 0.25% | — | 0.20% | 0.31% |
| NZD | -0.00% | -0.01% | 0.32% | 0.19% | 0.05% | -0.20% | — | 0.11% |
| CHF | -0.12% | -0.13% | 0.21% | 0.06% | -0.06% | -0.31% | -0.11% | — |
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