Talking Points

- EUR/GBP weakens ahead of UK inflation and jobs data and the latest BOE monetary policy release.

- All eyes on a couple of important technical support levels.

- EUR longs hit their highest level since May 2011.

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A raft of upcoming UK data which may point to UK rates increases ahead of current expectations is weighing on EUR/GBP which traded at a near one-month low earlier in the session. The pair, which touched a one-year high at the end of August, traded as low as 0.90750 on Monday ahead of UK inflation data (Tuesday), UK jobs and wages data (Wednesday) and the latest Bank of England monetary policy report (Thursday). Analysts are expecting both CPI and CPIH to rise from 2.6% to 2.8%, putting pressure on BoE Governor Mark Carney to stem price rises just as the UK economy takes a downturn.

DailyFX analyst Martin Essex will be covering the UK inflation report as it happens here.

The wages data is expected to see average weekly earnings nudge up from 2.1% to 2.3%, but any further widening of the inflation-wages gap will see calls increase for inflation to be tempered. BoE Governor Carney will be able to address these issues on Thursday at the latest MPC meeting where all policy levers are expected to remain unchanged.

I will covering the UK jobs and wages release live on Wednesday here.

On the EUR side of the pair, the latest CFTC Commitment of Traders Report shows net speculator long positions at their highest level since May 2011. On the other side of the pair, GBP short positions edged higher and have nearly doubled since May on Brexit negotiation fears.

And the UK government will present the Great Repeal Bill to Parliament on late Monday to vote on. The bill will repeal the 1972 European Communities Act and will end the jurisdiction of the European Court of Justice. Despite UK PM Theresa May’s thin majority in Parliament, the bill is expected to pass, although a late rebellion by Conservative and/or Labour MPs could put this in doubt, potentially sending GBP tumbling lower.

Chart: EURGBP Three Minute Timeframe (September 05, 2017)

EUR/GBP Weakens Further as UK Data Releases, BOE Near

Chart by IG

The above chart shows EUR/GBP trading near a couple of important resistance levels. A close below the Fibonacci 23.6% retracement level at 0.90880 would undermine the pair, while a close below the 50-day ema would also add to the bearish impulse.

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--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1