Market Analysis

The EUR/GBP pair has pared its intraday gains following the release of the HCOB Purchasing Managers Index (PMI) data from the Eurozone and Germany, trading around 0.8430 during Wednesday’s European session. The Eurozone Services PMI declined to 52.9 in August, down from 53.3 in the previous month. Additionally, the Composite PMI fell to 51.0, missing expectations and dropping below the prior reading of 51.2, which was expected to remain unchanged.

In Germany, the HCOB Services PMI slipped to 51.2 in August, slightly below market expectations of no change from the previous 51.4. The Composite PMI also declined to 48.4, just under the anticipated and prior reading of 48.5.

However, the upside for EUR/GBP could be capped as the Euro faces pressure amid strong speculation that the European Central Bank (ECB) will cut interest rates in September. This would be the ECB's second rate cut since it began moving toward policy normalization in June. Policymakers remain optimistic that inflation will gradually return to the bank's 2% target by 2025.

The EUR/GBP pair may struggle as traders expect the Bank of England (BoE) to hold off on any rate cuts at its September meeting. However, a 25 basis points (bps) rate cut is anticipated in the BoE's November meeting.

Concerns about the global economy have heightened following weak PMI data from the world's two largest economies. Traders will closely monitor the PMI data from the United Kingdom (UK) later in the day.

Paraphrasing text from "FX Street" all rights reserved by the original author.