EUR/GBP stays pressured under 0.8800 as traders await UK employment data, BOE’s Bailey

• EUR/GBP defends the previous day’s losses, the first in five, ahead of the key data/events.
• Fears surrounding the bloc join latest efforts from the UK government, BOE to weigh on prices.
• ECB policymakers’ speeches, risk catalysts could also entertain intraday traders.
• Fears of a rebound are high considering the market’s disappointment from new UK government.

EUR/GBP holds lower ground near 0.8772, keeping the previous day’s pullback ahead of the key data/events scheduled for publishing on Tuesday. Other than the cautious mood before the key catalysts, recent measures from the UK government and the Bank of England (BOE), as well as fears surrounding the bloc, also exert downside pressure on the cross-currency pair.

“British finance minister Kwasi Kwarteng, who last month sparked a bond market rout with unfunded tax cuts, sought to reassure investors on Monday by bringing forward a budget announcement and naming a Treasury insider to run the department,” said Reuters. The news also mentioned, “Under pressure to rebuild investor confidence, Kwarteng said he would reveal longer-term tax and spending plans and independent economic forecasts on Oct. 31, more than three weeks earlier than previously scheduled.”

Additionally, the BOE double the size of maximum debt buybacks from 5 billion pounds to 10 billion pounds to placate investors.

On the other hand, Germany’s rejection of the previous market chatters that Berlin backs the European Union (EU) joint debt issuance to battle the energy crisis, favored by Bloomberg, seemed to have flared the risk-off mood and weighed on the EUR/GBP prices. Further, the downbeat EU Sentix Investor Confidence index, the lowest since March 2020, also weighed on the pair. It should be noted that the escalating Russian shelling on Kyiv exerts additional downside pressure on the quote.

Looking forward, the UK’s latest employment data will be crucial for the EUR/GBP pair traders to watch for fresh impulse amid the increasing odds of the BOE’s aggressive rate hikes. Forecasts suggest the headline Claimant Count Change to drop by 11.4K in September versus the previous addition of 6.3K. However, the ILO Unemployment Rate is likely to remain unchanged at 3.6% for the three months to September.  Also, BOE Governor Andrew Bailey’s speech shouldn’t be missed as Mr. Bailey may try to defend the latest surprise moves and may help the GBP to extend the latest rebound.

Additionally, comments from the European Central Bank (ECB) policymakers and the second-tier EU data might offer additional catalysts to watch during the first full market day.

Technical analysis

A clear U-turn from the 10-DMA and downside break of a one-week-old ascending trend line, respectively around 0.8775 and 0.8790, keeps EUR/GBP bears hopeful.