EUR/GBP hits 2-week highs at 0.8375 area, despite strong UK data

• EUR/GBP rose to two-week highs on Tuesday in the 0.8375 area, despite strong US jobs data.
• Analysts interpreted the latest UK jobs release as reinforcing the likelihood of another BoE rate hike in February.

A strong UK labor market report failed to lift sentiment towards sterling on Tuesday, with GBP among the session’s worst performing G10 currencies, sending EUR/GBP to two-week highs in the session. zone of 0.8375. The technical buying seemed to boost the pair, which is now up 0.2% on the day as it broke last week’s highs in the 0.8360 area. The currency pair is now testing resistance in the form of November 2021 lows in the 0.8380 regions before a test of the 21-day moving average at 0.8394.

Traders should be aware that since mid-December the EUR/GBP sell-off rally has been a profitable short-term trading strategy and as UK economic data beats expectations and reinforces expectations for higher of BoE rates, it is quite possible that it will continue to be so. To quickly recap the highlights of Tuesday’s UK jobs report; the ONS revealed that employers added a record 184,000 to their staff payrolls in December. That sent the jobless rate falling to 4.1%, its lowest level since June 2020, while job openings reached a record 1.247 million in the three months to December, double their levels in the same period of the year. last year. “Coupled with rising headline inflation rates and mounting evidence that Omicron’s impact has been modest, it looks increasingly likely that the Bank of England will raise rates in February,” ING analysts concluded.

It remains to be seen whether increased confidence in the likelihood of the BoE following December’s 15bp rate hike with another rate hike next month translates into a reversal of EUR/GBP towards lows below 0.8350 for the week. pass. The drop in US and European stocks on Tuesday amid a sharp rise in US government bond yields on Fed rate hike bets is currently weighing on sterling , just like lower stocks are also weighing on other risk-sensitive currencies.

Technical levels