The EUR/GBP exchange rate has declined as speculation grows around the potential for the European Central Bank (ECB) to enact an interest rate cut in October. In contrast, the British Pound is experiencing support due to beliefs that the Bank of England (BoE) will adopt a more deliberate approach to rate reductions. In the early hours of Monday, the EUR/GBP pair traded around 0.8340, reversing some of the gains achieved in recent sessions following the announcement of second-quarter GDP data from the United Kingdom.
Data reveals that the UK’s Gross Domestic Product (GDP) experienced a quarterly increase of 0.5% for Q2, which was just shy of the anticipated growth of 0.6% from both forecasts and the prior quarter’s performance. Annually, GDP growth also underperformed, registering at 0.7%, compared to expectations of 0.9%. The disappointing GDP figures contributed to the downward momentum for the EUR/GBP exchange rate, as market participants closely monitor upcoming economic indicators from Germany, including preliminary Consumer Price Index data for September.
Additionally, subdued inflation rates reported in France and Spain have solidified predictions for the ECB’s potential third consecutive interest rate cut. The ECB resumed its rate-cutting cycle in September after a period of stability in July. In September, inflation in France rose by just 1.5% year-over-year, falling short of the forecasted 1.9% and down from the previous 2.2%. Month-over-month, inflation showed a notable decline of 1.2%, surpassing expectations of a smaller drop. Meanwhile, in Spain, the Harmonized Index of Consumer Prices (HICP) reflected a 1.7% annual increase in September, below the predicted 1.9% and a decrease from the August figure of 2.4%. Month-on-month, the index even declined by 0.1%, contrasting the expectation for stability.
