- EUR/GBP edges lower as expectations rise for a potential ECB rate cut in September.
- The Eurozone Producer Price Index rose by 0.8% MoM in July, marking the largest increase since December 2022.
- The British Pound gains strength amid growing expectations that the BoE will adopt a more hawkish stance compared to the ECB.
EUR/GBP relinquishes some of its recent gains from the previous session, trading around 0.8420 during Thursday’s Asian hours as traders await the release of Eurozone Retail Sales data later in the day.
The decline in the EUR/GBP cross is influenced by increasing speculation that the European Central Bank (ECB) may cut interest rates in September. This would mark the second rate cut by the ECB since it began shifting toward policy normalization in June.
In the Euro Area, the Producer Price Index (PPI) rose by 0.8% month-over-month in July, the largest increase since December 2022. This follows an upwardly revised 0.6% rise in June and significantly exceeds the market forecast of 0.3%.
Conversely, the Eurozone Services PMI fell to 52.9 in August, down from 53.3 in July. The Composite PMI also decreased to 51.0, missing expectations and falling short of the previous reading of 51.2.
The British Pound (GBP) strengthens further, bolstered by expectations that the Bank of England (BoE) will adopt a more gradual rate-cutting approach compared to the ECB. This sentiment was supported by Tuesday’s BRC Like-for-Like Retail Sales data, which showed a 0.8% year-on-year increase in August, up from 0.3% in July and marking the fastest growth in five months.
Positive sentiment from the UK macroeconomic front also contributed to the GBP's strength. The Purchasing Managers Index (PMI) survey indicated that business activity in August accelerated to its fastest pace since April. The S&P Global UK Composite PMI rose to 53.8 in August, up from 53.4 in July and revised higher from the preliminary estimate of 53.4. The Services PMI increased to 53.7 in August from 53.3 in the previous month. The Manufacturing PMI held steady at 52.5 for August, consistent with preliminary estimates.
