Early in the European session, the European and UK PMIs are being released on Friday. This could present a potential opportunity for the EURGBP pair if we see a divergence in the print between the two. The EURGBP has seen some falls this week already on increasing expectations that the BoE will need to be more aggressive to contain rising inflation. Take a look at the EURGBP chart below.

On Tuesday, UK wages grew above the market maximum expectations showing the dreaded prospect of a UK wage price spiral. Average weekly earnings – including bonuses in the UK – rose 5.9% which was above market forecasts of a 5.1% increase. Pay excluding bonuses grew by 6.6% which was above the forecast of 6.2%.

On Wednesday, UK inflation data came in at 10.1% above the 9.8% economists were projecting. This will be a concern for the BoE who wanted to be doing better in their inflation battle.

Furthermore, the core remains ‘sticky’ at 6.2% coming in above market expectations and increasing expectations of a more hawkish BoE. Deutsche Bank now sees two more rate hikes from the BoE before reaching a peak of 4.75% in the summer. This has been supporting the GBP this week.

So, the GBP has seen reasons for strength this week. Watch the UK PMIs early Friday. If they come in high then you would expect a possible boost of the GBP further. Before the UK PMIs we have the European PMIs and a miss across the board, starting with the French print at 08:15 BST, should potentially see the EURGBP pair fall. If the German PMI print comes in weaker at 08:30 BST too, then the EURGBP could push lower ahead of the UK PMIs at 09:30. If there is a clear divergence here, with weak European PMIs and strong UK PMIs, then that could reasonably create a possible EURGBP sell bias for the rest of the European Friday morning session. One to watch today!