Support Breaks Ahead of BoE Rate Decision

EUR/GBP – rates, charts, and analysis

• New jobs data in the UK shows wages rising sharply.
• The Bank of England is set to raise interest rates by 25 basis points tomorrow.
• EUR/GBP slipped to a multi-month low.

Most read: GBP/USD Price Forecast: 1.2600 Holdings as Bulls Eye New Catalyst

newly Bloomberg report Use Reed Recruitment Jobs data shows that the UK job market remains thriving with people changing jobs resulting in an average 10% increase in wages. This is significantly higher than last month’s official UK data which showed average earnings including gratuity (3 months/year) rose 5.9% in February, while average earnings excluding gratuity rose 6.6% over the same timeframe. .

Bank of England: A Forex Trader’s Guide

The Bank of England is set to raise the UK Bank Rate by another 25 basis points to 4.50% tomorrow. Recent inflation data has shown that price pressures remain stubbornly high, and today’s Reed report, while not an official data point, will have many on Threadneedle Street worried that a strong wage market could keep inflation higher for longer. Commentary after the decision and press conference should see BoE Governor Andrew Bailey pointing to the labor market as an area of ​​continued concern.

The latest UK GDP data will be released on Friday this week and is expected to show that the UK missed entering a technical recession in the first three months of this year. Preliminary year-on-year first-quarter data is expected to show growth of 0.2%, compared to 0.6% in the fourth quarter of 2022, with year-on-year growth slowing to 0.4% in March from 0.5%.

For all market movement data releases and events, see DailyFX Economic Calendar

euro/GBP It broke below a multi-month level of horizontal support on Tuesday, and opened below the 200-day moving average for the first time since August 2022. The range-breaking move occurred despite hawkish comments from a number of ECB Governing Council members who see further raise interest rates in the coming months. This comment should act as support for the Euro but it appears that this is not the case currently. The pair is located squarely in the oversold zone, using the CCI indicator, while the volatility in the pair remains low. If EUR/GBP continues to fade lower, support should be seen around 0.8600 and 0.8550.

EUR/GBP daily price chart – May 10, 2023

Chart via TradingView

Major weekly turnaround in retailer positioning

Retail trader data shows that 72.40% of traders are net long with the ratio of long to short traders at 2.62 to 1, the number of traders who are long is 0.70% less than yesterday and 77.36% higher than last weekwhile the number of short traders is 10.04% less than yesterday and 38.04% less than last week. We usually take the opposite view of crowd sentiment, and the fact that traders are net worth indicates the EUR/GBPPrices may continue to fall.

Traders are long in positions longer than yesterday and last week, giving us a combination of current sentiment and recent changes A contrarian trading bias is stronger than EUR/GBP.

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