EUR/GBP flatlines under 0.8550 ahead of Super Thursday’s central bank bonanza

• EUR/GBP is trading sideways just under 0.8550 on Thursday, the pair having ignored strong UK jobs numbers.
• The pair is in wait-and-see mode ahead of Super Thursday, when both the ECB and BoE will set policy.

EUR/GBP has been moving sideways just to the south of the 0.8550 level throughout the duration of Tuesday’s sessions as the pair enters wait-and-see mode ahead of super Thursday, a day which sees both the BoE and ECB decide on policy in quick succession. The 200-day moving average resides at 0.8560 and, in the run up to the two major central bank events, is likely to act as a ceiling, whilst support in the form of this week’s earlier lows around 0.8500 will likely act as a floor.

To recap what markets are expecting from the BoE and ECB; most expect the BoE to leave rates unchanged at 0.1% amid the recent uptick in uncertainty about the UK’s near-term outlook as the Omicron variant spreads and Covid-19 curbs are tightened. That despite calls on Tuesday from the IMF for the BoE to avoid inaction bias and get on with modest policy tightening with a focus on the 12-24 month time horizon so as to minimise the costs associated with tackling second-round inflation effects. The ECB, meanwhile, is expected to confirm that the PEPP will end in March and that the APP will have its monthly purchase rate upper on a temporary basis to avoid a cliff-edge drop in net monthly bond purchases that could roil European bond markets.

Back to EUR/GBP, the pair largely ignored Tuesday morning’s data releases. The latest UK jobs report showed employers hiring a record number of staff in November and the unemployment rate in October dropping to 4.2% as expected, in a further sign that the UK labour market weathered the end of the government’s furlough scheme in September well. Eurozone Industrial Production saw a decent 1.1% MoM recovery in output in October, only slightly below the expected 1.2% MoM pace of growth.