Market Analysis

As the UK economy grows 0.6% QoQ in Q2, EUR/GBP trades with slight losses below 0.8600

Amos Simanungkalit · 15 Aug 20248.9K Views

The EUR/GBP pair declines toward 0.8565 during early Thursday's European session, following UK GDP growth figures that matched expectations, giving the Pound Sterling (GBP) an advantage over the Euro (EUR). Investors are now shifting their focus to Friday's UK Retail Sales report, which is anticipated to show a 0.5% increase in July on a month-over-month basis.

According to data released by the Office for National Statistics (ONS) on Thursday, the UK's economy expanded as expected in the second quarter of the year. The GDP grew by 0.6% quarter-on-quarter (QoQ) in Q2, slightly down from the previous reading of 0.7%. This figure aligned with market expectations of 0.6% growth. Additionally, the UK's GDP saw a year-on-year (YoY) growth of 0.9% in Q2, up from a 0.3% increase in Q1, and consistent with the 0.9% forecast. The positive economic data has attracted GBP buyers, creating downward pressure on the EUR/GBP cross.

On the Euro side, the European Central Bank (ECB) is anticipated to continue cutting its deposit rate through the end of next year. A Bloomberg survey suggests that the benchmark rate could drop to 2.25% by December 2025, following six consecutive quarter-point reductions.

Meanwhile, Eurostat reported on Wednesday that the Eurozone's second-quarter (Q2) Gross Domestic Product (GDP) growth rate held steady at 0.3%, in line with forecasts and the previous quarter's figures. However, Eurozone Industrial Production for June fell short of expectations, coming in at -0.1% month-over-month (MoM) compared to the prior reading of -0.9% and below the estimated 0.5% increase.