EUR/GBP holds in bullish grounds in mid 0.85 areas

  • EUR/GBP firms as the pound drifted from 5-week highs vs. the greenback.
  • (BoE) is set to tighten its monetary policy quicker than the European Central Bank on inflation concerns.

EUR/GBP is 0.15% higher in the day, trading at 0.8542 and between a low of 0.8510 and a high of 0.8543 so far. Overall, the pound reached a new 5-week high against the dollar and a 3-week high to the euro on Tuesday, supported by labour market data that showed the total number of payrolled employees in Britain has climbed to pre-pandemic levels.

Britain’s post-lockdown economic recovery has been under scrutiny of late with regards to the Bank of England’s stance on interest rates, currently at record lows. Tuesday’s data included details of the nation’s employers which were seen to add a record 241,000 staff to their payrolls last month.

Businesses reported more than 1 million vacancies in August – an all-time high – and the unemployment rate fell slightly to 4.6% in the three months to July, the Office for National Statistics said, in line with economists’ expectations in a Reuters poll.

Sterling hit a fresh 5-week high of $1.3913 in the London afternoon as the greenback dipped after the US inflation data showed a less-than-expected rise in US inflation last month, creating uncertainty about the timing of the Federal Reserve’s tapering of its asset purchases.

Meanwhile, the Bank of England expects inflation to rise sharply this year and hit a peak of 4%. A strong reading for inflation would reinforce expectations that the Bank of England (BoE) is set to tighten its monetary policy quicker than the European Central Bank or the US Federal Reserve, Reuters said. Additionally, a Reuters poll found that investors believed the BoE will raise borrowing costs by the end of 2022.

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