EUR/GBP extends downside near 0.8550, focus on UK employment data

• EUR/GBP trades in negative territory for the fourth consecutive day around 0.8550 in Monday’s early European session.
• Bloomberg economists see the ECB cut its deposit rate once a quarter through the end of next year. 
• The UK labor market data on Tuesday will be in the spotlight. 

The EUR/GBP cross extends its decline to near 0.8550 during the early European session on Monday. The anticipation of the easing cycle ending sooner than previously anticipated by the European Central Bank (ECB) drags the Euro (EUR) lower. However, traders will keep an eye on the UK employment report for fresh catalysts, which is due on Tuesday. 

The ECB is likely to cut its deposit rate once a quarter through the end of next year, according to Bloomberg economists. The sooner-than-previously-expected rate cuts from the ECB exert some selling pressure on the shared currency against the Pound Sterling (GBP). A Bloomberg survey of forecasters indicated that the benchmark is expected to reach 2.25% in December 2025 after six straight quarter-point declines. Previously, respondents projected that this level would be achieved in the second quarter of 2026.

On the GBP’s front, traders bet on two more rate cuts by the Bank of England (BoE) in 2024. The next monetary policy meeting is scheduled for September 19, and the market sees a 40% chance of a cut. The UK labor market data Tuesday could offer some hints about the UK economy and further rate path. 

The UK Unemployment rate is expected to tick higher to 4.5% in June. Average weekly earnings ex-bonuses are expected to fall for the three months ended in June to 5.4% YoY. Including bonuses, total earnings are expected to fall to 4.6%YoY. The slower-than-expected wage growth will keep the BoE in easing mode, which will continue to undermine the GBP and cap the cross’s downside.