EUR/GBP declines as the Sterling benefits from robust UK labor market

The EUR/GBP trades at 0.8505, marking a 0.30% loss in Tuesday's session.
The Sterling gained due to the report of strong UK labor market data.
German ZEW survey signals improved Eurozone expectations.
Markets are still betting that the BoE’s rate cut cycle will start later than the ECB’s.

Patricio Martín FXStreet

In Tuesday's session, the EUR/GBP is seen at 0.8505, edging lower by 0.30% primarily influenced by robust UK labor market figures. Mixed macroeconomic signals from the German economy continue to shape the European Central Bank (ECB) while markets start to delay the start of the easing cycle for the Bank of England (BoE) to August.

In line with that, labor data on Tuesday showed that the UK wage growth remained sticky, while the Unemployment rate was seen declining to 3.8% in the three months ending in December. On the EUR side, the German ZEW survey showed mixed signals with the positive take being that the expectations index improved in January.

Regarding expectations, markets continue to bet on a more hawkish BoE as the resilience of the UK economy and the robustness of the labor markets justifies the delay of rate cuts. On the other hand uncertainty over the Eurozone’s economies makes markets think that the ECB will start the easing sooner. For the BoE, markets are betting for a first-rate cut in August while on the ECB’s side, in June.

EUR/GBP technical analysis

Starting with the daily chart, the Relative Strength Index (RSI) is in negative territory, with a declining trend suggesting that sellers are gaining momentum. The Moving Average Convergence Divergence (MACD) histogram also corresponds with this negative momentum, displaying a falling trend with green bars, hence indicating a bearish momentum.

However, the hourly chart provides a more nuanced view. Here, the RSI remained in the oversold zone, but there's a subtle uptick, hinting at the possibility of some buyers stepping in. Yet, the MACD histogram showed red bars, although they were gradually becoming less negative, indicating a slow shift towards bullish momentum.

Finally, considering the pair's position against the Simple Moving Averages (SMAs), the EUR/GBP is below the 20,100, 200-day SMAs, asserting that the overall trend is clearly bearish.

EUR/GBP daily chart

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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