EUR/GBP is trading near 0.8425 in the early European session on Thursday, with the cross experiencing slight losses following the release of UK GDP data. The UK economy showed growth of 0.4% month-over-month in May, surpassing expectations after a stagnant April. This positive data has led to modest selling of the Pound Sterling.
There is increasing uncertainty surrounding the Bank of England’s decision on interest rates, with some policymakers cautioning against rate cuts due to concerns about inflation and wage behavior. Despite this, investors are now pricing in a 60% chance of a rate cut at the August meeting, the first time since 2020.
On the Euro front, ECB governing council member Fabio Panett has hinted at further interest rate cuts, leading traders to bet on a potential ECB rate cut this year. This sentiment may limit the upside for the EUR/GBP cross in the short term.
Overall, GDP growth is a key indicator for a nation’s economy, with higher growth typically seen as positive for the currency. Inflationary pressures, interest rates, and global investor sentiment all play a role in shaping currency movements in response to GDP data.