Market Analysis

Ahead of the UK, the EUR/GBP remains over 0.8500, according to Eurozone PMI data

Amos Simanungkalit · 22 Aug 202425.3K Views

EUR/GBP is attempting to recover its recent losses from the previous session, trading around 0.8520 during Thursday’s Asian hours. The uptick in the EUR/GBP pair can be attributed to traders anticipating a gradual reduction in interest rates by the European Central Bank (ECB). However, ECB officials have been cautious about committing to a specific timeline for rate cuts due to concerns over a potential resurgence in inflation.

The probability of an ECB rate cut increased following Tuesday’s release of the Harmonized Index of Consumer Prices (HICP) from the European Monetary Union (EMU), which showed no change month-on-month for July, in line with expectations. Additionally, the Core HICP decreased by 0.2%, consistent with the drop seen in June. Traders are now turning their attention to the Purchasing Managers Index (PMI) reports for the Eurozone and Germany, which are scheduled for release on Thursday.

In the United Kingdom, recent inflation and employment data have bolstered the case for the Bank of England (BoE) to maintain the interest rate at 5.0% in its upcoming September meeting. This development may have supported the Pound Sterling (GBP). Rupert Thompson, Chief Economist at IBOSS, noted that "The BoE is expected to keep rates steady in September, with any potential rate cut likely being delayed until November."

On Thursday, the UK PMI data release will be crucial for the British Pound. The Composite PMI is expected to rise slightly to 52.9 in August, up from 52.8 in the previous month, indicating growth in both the manufacturing and services sectors. Stronger figures could further solidify the case for the Bank of England to maintain its current interest rate in September.