Anna 
In the early hours of European trading on Tuesday, EUR/GBP found itself on the defensive, maintaining a position above 0.8550. The cross initially saw some bullish activity following the release of UK employment data; however, potential upside momentum is being tempered by investor skepticism surrounding the European Central Bank’s (ECB) commitment to keeping interest rates elevated in the long term. At present, the cross is trading at 0.8572, marking a marginal 0.02% decline for the day.
The latest data from the UK’s Office for National Statistics, released on Tuesday, indicated that the ILO unemployment rate in the country remained steady at 4.2% in the three months to October, aligning with market expectations. Additionally, the number of individuals applying for unemployment benefits increased by 16,000, below the market consensus of 20,300, but higher than the 8,900 increase observed in October. The UK recorded an employment change of 50,000 in October, compared to the previous value of 54,000.
Market sentiment suggests that the Bank of England (BoE) is likely to maintain its current stance and uphold the narrative of prolonged high-interest rates, which could bolster the pound against the euro. Investors are anticipating that the BoE might be the last major central bank to resist interest rate cuts.
Turning to the Eurozone, traders are eagerly awaiting Thursday’s European Central Bank monetary policy meeting, where the deposit mechanism interest rate is expected to remain unchanged at 4.0%. Eurozone inflation, registering at 2.4% in November, the lowest in over two years, has fueled speculations of an early 2023 interest rate cut by the ECB. Current market pricing reflects expectations of a reduction exceeding 130 basis points starting March next year.
Looking ahead in the week, Tuesday will see the release of German and Eurozone ZEW survey data, while Thursday holds significant interest rate decisions from both the European Central Bank and the Bank of England. Traders are keenly observing these key events for potential EUR/GBP trading opportunities, seeking insights into the future direction of the cross.
