EUR/GBP loses momentum above mid-0.8500s following UK employment data

The EUR/GBP cross remains on the defensive above the mid-0.8500s during the early European session on Tuesday. The cross attracts some buyers following the UK employment data. However, the upside of EUR/GBP might be capped as investors do not believe in the European Central Bank (ECB) higher for a longer rate narrative in the Eurozone. At press time, the cross is trading at 0.8572, down 0.03% on the day.

The latest data from the UK Office for National Statistics showed on Tuesday that the nation’s ILO Unemployment Rate remained steady at 4.2% in three months to October, in line with market expectation. Additionally, the number of people claiming jobless benefits rose by 16K in November versus an 8.9K increase in October, above the market consensus of 20.3K. The British Employment Change data for October arrived at 50K from the previous reading of a 54K gain.

The anticipation that the Bank of England (BoE) might hold rates and maintain its higher for longer narrative lifts the British Pound (GBP) against the Euro (EUR). Market players expect the BoE is likely to be the last among its peers to ease monetary policy.

On the Euro front, traders will closely focus on the ECB monetary policy meeting, which is likely to hold its Deposit Facility Rate unchanged at 4.0%. Eurozone inflation came in at 2.4% in November, the lowest level in more than two years. The easing in inflationary pressure in the Eurozone fuels the bet for rate cuts early next year. The market is now pricing in a rate cut of more than 130 basis points (bps) beginning in March of next year.

Looking ahead, the German and Eurozone ZEW Survey will be released later on Tuesday. On Thursday, the BoE and ECB interest rate decisions will be in the spotlight. Traders will take cues from these key events and find trading opportunities around the EUR/GBP cross.