EUR/GBP falls on upbeat UK employment data

• EUR/GBP fell to 0.8540, below the 200-day SMA.
• UK employment data supported the pound during the European session.
• Sentiment data caused the euro to lose interest during the session.

Tuesday saw a decline in the EUR/GBP pair following the release of UK employment data which supported the pound sterling. On the other hand, weak euro-weighted European sentiment figures.

The UK published mixed labor market data for the three months to June. Average weekly earnings, excluding bonuses, rose 5.4% from a year earlier, in line with expectations but slightly above the Bank of England’s (BoE) Q2 projection of 5.1%. When bonuses are included, total revenue growth fell to 4.5 percent from last year, down 1.2 percentage points. This deceleration in wage growth could support the BoE’s relaxed stance, although upcoming consumer price index (CPI) data will be crucial. In addition, unemployment unexpectedly fell to 4.2 percent, the lowest level since February.

Meanwhile, Germany’s August ZEW survey indicated significant economic weakness. Expectations fell to 19.2 from 41.8 in July, while the current rating worsened to -77.3. This marks the second consecutive decline in expectations, hitting the lowest level since January, signaling continued economic challenges in the second half of the year. The deteriorating outlook for the euro zone suggests that the European Central Bank (ECB) may continue to ease, with an interest rate cut expected in September.

Technical analysis EUR/GBP

EUR/GBP’s Relative Strength Index (RSI) is breaking out of overbought conditions. At the same time, the MACD (Moving Average Convergence Divergence) indicator has indicated a noticeable decline in its green bars and this change implies an approaching bearish outlook for EUR/GBP. This is also supported by the loss of the 200-day simple moving average (SMA) of 0.8575, which is now a resistance. The 0.8530-0.8500 area is the next target for sellers.

EUR/GBP daily chart