The return of EUR/GBP bears due to contrasting bets by ECB and BoE, with focus on upcoming British data

The return of EUR/GBP bears due to contrasting bets by ECB and BoE, with focus on upcoming British data

The EUR/GBP currency pair has been experiencing a resurgence of bearish sentiment in recent weeks, as contrasting bets by the European Central Bank (ECB) and the Bank of England (BoE) have led to increased volatility. With a particular focus on upcoming British data, market participants are closely monitoring the economic indicators that could potentially influence the direction of the pair.

The ECB has taken a more dovish stance in recent months, signaling its commitment to maintaining accommodative monetary policy. This has been driven by concerns over the sluggish economic recovery in the Eurozone and the potential impact of the highly contagious Delta variant of COVID-19. The central bank has reiterated its commitment to keeping interest rates at record lows and continuing its asset purchase program until it sees a sustained improvement in inflation.

On the other hand, the BoE has adopted a more hawkish tone, signaling its intention to gradually withdraw stimulus measures as the UK economy shows signs of recovery. The central bank has hinted at the possibility of raising interest rates sooner than previously anticipated, citing rising inflationary pressures and a strong rebound in economic activity. This divergence in monetary policy expectations has fueled a shift in sentiment towards the GBP, leading to increased selling pressure on the EUR/GBP pair.

Looking ahead, market participants are eagerly awaiting key economic data releases from the UK, which could provide further insight into the state of the economy and potentially influence the direction of the pair. One of the most closely watched indicators is the UK’s Gross Domestic Product (GDP) growth rate. A stronger-than-expected GDP figure could bolster expectations of an earlier interest rate hike by the BoE, potentially leading to further weakness in the EUR/GBP pair.

Additionally, inflation data will also be closely scrutinized. The Consumer Price Index (CPI) is expected to show a further increase in inflationary pressures, driven by rising energy and commodity prices. Higher inflation could strengthen the case for the BoE to tighten monetary policy sooner, which would likely weigh on the EUR/GBP pair.

Furthermore, market participants will be monitoring the UK labor market data, including the unemployment rate and wage growth figures. A decline in the unemployment rate coupled with robust wage growth could provide further evidence of a strong economic recovery, potentially boosting the GBP and pressuring the EUR/GBP pair.

In conclusion, the return of EUR/GBP bears can be attributed to the contrasting bets by the ECB and BoE, with the latter adopting a more hawkish stance. The upcoming British data releases, including GDP growth rate, inflation figures, and labor market data, will be crucial in determining the future direction of the pair. Market participants will closely analyze these indicators to gauge the strength of the UK economy and assess the likelihood of an earlier interest rate hike by the BoE.

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• Source: Plato Data Intelligence.
• Source Link: https://zephyrnet.com/eur-gbp-bears-return-amid-ecb-and-boes-contrasting-bets-eyes-on-british-data/