- EUR/GBP hovers below the psychological level at 0.8700.
- The uncertainty over the BoE’s further policy actions put pressure on the Pound Sterling.
- ECB is expected to hold further interest rate hikes could weigh on the Euro.
EUR/GBP trades higher around 0.8680 during the Asian session on Thursday. The uncertainty of the next policy action by the Bank of England (BoE), which, in turn, is seen as a key factor acting as a headwind for the EUR/GBP pair.
The most recent UK consumer inflation figures unveiled on Wednesday revealed that the headline CPI held steady at 6.7% in September, defying expectations for a slight dip to 6.6%. This outcome has fuelled speculations for a potential Bank of England (BoE) rate hike in November.
Earlier this week, the UK Office for National Statistics (ONS) reported a slight moderation in wage growth for the three months leading to August. This development may provide the BoE with room to maintain interest rates at their current level.
The relatively subdued earnings data from the United Kingdom might have exerted downward pressure on the Pound Sterling (GBP), contributing to the overall support on the EUR/GBP pair.
Breaking down the earnings figures, the Average Earnings Excluding Bonus (3Mo/Yr) remained unchanged at 7.8% in August, aligning with expectations. However, the Pay levels Including Bonus for the same quarter decelerated to 8.1%, falling short of the market consensus of 8.3%.
On the Euro docket, the speculations suggesting that additional rate hikes by the European Central Bank (ECB) may not be on the horizon could reinforce the negative outlook for the EUR/GBP pair.
The recent data from Eurostat revealed that the Harmonized Index of Consumer Prices (HICP) in the Eurozone stood at 0.3% in September.
In a statement on Wednesday, European Central Bank (ECB) President Christine Lagarde noted that underlying inflation remains robust, and wage growth continues to maintain historically high levels. These factors contribute to the ongoing narrative surrounding the Euro’s performance against the British Pound.
Investors will likely focus on Retail Sales from the United Kingdom and the German Producer Price Index (PPI) on Friday, seeking more cues on economic scenarios in both countries.