EUR/GBP likely to be in its comfort zone for time being

Sterling came under pressure yesterday following the disappointing inflation data. Understandably, as  the end of the year approaching is approaching.  

Bank of England (BoE) governor Mark Carney had always referred to the end of the year as the time when it should become clearer at what time the fundamental conditions would justify a rate hike in the UK. So it is hardly surprising that Sterling reacts more sensitively to data publications. 

The longer the data remains weak the more slowly the members of the Monetary Policy Committee are going to take things when it comes to a rate rise. It makes therefore sense to take a look at today's labour market data. 

In addition to the recently weaker Sterling it is wage growth around 3% that is seen as an indication that inflation will rise and that the BoE might hike rates early next year. 

"However, that fact is soon going to become questionable if the data disappoints again a few more times. For the time being EUR/GBP is likely to be in its comfort zone around 0.74", says Commerzbank.