GBP: Underperformance starting to become clearer - Commerzbank

Investors seem to be taking a dimmer view of sterling, presumably on the back of the fiscal straitjacket currently trapping UK Chancellor Rachel Reeves, ING's FX analyst Chris Turner notes.

EUR/GBP to challenge April's spike high at 0.8735

"This week, however, the story could be more macro and particularly focus on the labour market. This morning, we have already seen quite a poor labour market survey from KPMG and Thursday this week sees labour market data for June. In May, payrolled employees fell by quite a large 109k. Most expect this number to be revised up."

"If not, perhaps the UK labour market is in a weaker position after all, and the Bank of England will have to cut rates more quickly. Tomorrow, we will also see June CPI data, where services inflation is set to edge lower again - also supportive for slightly quicker BoE rate cuts. Currently, the market prices two 25bp rate cuts this year."

"EUR/GBP has held support at 0.8600. This week's data could see EUR/GBP break through 0.8670 resistance in a move to challenge April's spike high at 0.8735."