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EUR/GBP hovers around 0.8605, holding above the key 0.8600 psychological level after rebounding from a two-month low of 0.8596.
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UK GDP surprised to the upside, rising 0.4% in June and 0.3% in Q2, while Eurozone GDP met expectations at 0.1% and employment growth showed signs of slowing.
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Market focus now shifts to next Wednesday’s inflation reports from the UK and Eurozone, which are likely to influence EUR/GBP’s next move.
The EUR/GBP pair trades near 0.8605 on Thursday, recovering slightly after touching an intraday low of 0.8596 — its weakest level since June 2. The Euro found modest support from stable Eurozone GDP figures, helping the pair hold above the key 0.8600 psychological threshold after an earlier decline driven by stronger-than-expected UK growth data that lifted the British Pound.
Data released by the UK’s Office for National Statistics showed that the British economy expanded by 0.4% month-over-month in June, far surpassing the 0.1% forecast and rebounding from a 0.1% contraction in May.
Quarterly GDP for Q2 also came in stronger than anticipated, rising 0.3% quarter-over-quarter, compared to the 0.1% consensus, though slower than the 0.7% growth recorded in Q1.
On a year-over-year basis, the UK economy grew 1.2%, topping expectations of 1.0%, but slightly below the 1.3% pace seen in the previous quarter.
The upbeat data reinforces resilience in the UK economy and supports the case for the Bank of England to maintain a cautious stance on rate cuts, offering a tailwind to the Pound.
Meanwhile, Eurostat’s flash estimate showed the Eurozone economy grew 0.1% quarter-over-quarter in Q2, in line with market expectations and unchanged from the previous quarter. Year-over-year GDP growth also held steady at 1.4%, matching forecasts.
Employment in the Eurozone rose 0.1% QoQ in Q2, in line with projections but slower than the 0.2% growth in Q1. On an annual basis, job growth remained at 0.7%, slightly above expectations of 0.6%.
However, industrial production in the Eurozone disappointed, falling 1.3% MoM in June, deeper than the 1.0% forecast and reversing May’s upwardly revised 1.1% gain. Year-over-year, production growth slowed to just 0.2%, sharply missing the 1.7% forecast and down from a revised 3.1% in May, underlining ongoing challenges in the manufacturing sector.
Looking ahead, all eyes turn to next Wednesday’s inflation reports from both the UK and the Eurozone. These data releases could play a critical role in shaping expectations for the Bank of England and European Central Bank’s next policy moves — and may provide the catalyst for a directional breakout in EUR/GBP.
