The EUR/GBP currency pair is currently moving within a narrow range around the 0.8550 mark during the London session. Following a strong recovery, the asset is displaying a back-and-forth movement as investors eagerly anticipate the speech from Bank of England (BoE) Governor Andrew Bailey, seeking further guidance.
Despite the efforts of the BoE and UK diplomats to expand their inflation-control toolkit, inflation in the United Kingdom continues to show no signs of slowing down. Hence, market participants will closely monitor Andrew Bailey’s speech to gain insights into inflation trends and potential guidance regarding interest rates.
The rising inflationary pressure is burdening households, resulting in the steepest decline in household demand witnessed in the past 14 years. Alongside Bailey’s speech, investors will also pay close attention to labor market data.
Preliminary estimates indicate that the Claimant Count Change for June is projected to increase by 20.5K, in contrast to the previous month’s reported decline of 13.6K. The Unemployment Rate is expected to remain unchanged at 3.8%, while the Three-month Average Earnings Index is anticipated to rise to 6.8% compared to the previous release of 6.5%.
One economic indicator that could pose further challenges for BoE policymakers is labor cost data, which is expected to rise, exacerbating the inflation situation.
Turning to the Eurozone, the Sentix Investor Confidence has weakened to -22, down from the previous reading of -17. This decline reflects a significant loss of confidence among investors in current and future economic conditions. The European Central Bank (ECB) is expected to tighten its monetary policy further, as inflation remains unresolved.
On Friday, Mario Centeno, a member of the ECB Governing Council and the Governor of the Bank of Portugal, stated that Eurozone inflation could fall below 3% by the end of 2023. He added that inflation is declining at a faster rate, while the Eurozone labor market is currently experiencing its strongest performance ever.
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