EUR/GBP struggles to break above 0.8540 as focus turns to UK data

• EUR/GBP faces strong pressure near 0.8540 ahead of UK data.
• The BoE Governor is expected to offer new guidance on interest rates.
• The ECB would ease key rates before the BoE.

The EUR/GBP cross faces selling pressure as it attempts to extend its recovery above the immediate resistance at 0.8540 during the European session on Monday. The cross is expected to remain on hold as investors await UK Employment data for the three months ending in December, due to be released on Tuesday.

Investors expect the unemployment rate to fall to 4.0% from 4.2% in the three months ending in November. Over the same period, average earnings excluding premiums are expected to have grown at a slower pace of 6.0%, compared to the previous reading of 6.6%. A sharp decline in wage growth momentum would raise expectations of rate cuts by the Bank of England (BoE).

In today's session, the focus will be on BoE Governor Andrew Bailey's speech. Bailey is likely to provide clues about likely monetary policy action in March.

The British pound is expected to remain volatile as UK inflation, factory and retail sales data are due to be released following Tuesday's jobs data.

The Euro's overall appeal is weak against the British Pound as investors expect the European Central Bank (ECB) to start cutting key rates before the BoE. Prices in the Eurozone are constantly falling. However, ECB policymakers will ensure that inflation sustainably returns to the 2% target before announcing rate cuts. ECB President Christine Lagarde anticipated that the central bank should consider rate cuts in late spring.