The EUR/GBP pair is experiencing a slight decline despite a shift in sentiment surrounding the European Central Bank (ECB) following strong Eurozone GDP data. Traders are now waiting for the Eurozone Harmonized Index of Consumer Prices (HICP) data on Thursday to gauge the further movement of the currency pair. The UK budget announcement includes £40 billion in tax increases to reduce public finance deficits and increase funding for public services.
EUR/GBP is trading lower near 0.8360 during early European hours, with the Euro potentially finding support from investors who are scaling back expectations of a significant rate cut by the ECB in December. This change in sentiment is a result of better-than-expected economic data from the Eurozone and Germany released recently. The Eurozone GDP expanded by 0.4% quarter-over-quarter in Q3, surpassing expectations, while Germany’s GDP rose by 0.2% QoQ, recovering from a decline in the previous quarter.
In addition to the positive GDP data, Germany’s Consumer Price Index (CPI) showed an annual inflation rate of 2.0% in October, exceeding projections. The EUR/GBP cross also gained support as the Pound Sterling (GBP) weakened due to the UK Labour government’s budget announcement, which includes tax hikes to address public finance gaps. One of the key revenue sources in the budget is an increase in National Insurance contributions.
Traders are keeping an eye on an upcoming keynote address by Bank of England (BoE) Deputy Governor Sarah Breeden at a conference discussing the challenges and opportunities of emerging technologies in the financial ecosystem. This address could provide further insight into the future monetary policy direction of the BoE and impact the GBP. Overall, the EUR/GBP pair is facing some downward pressure despite positive economic data and a less-dovish ECB sentiment. Investors will continue to monitor key economic indicators and developments in the UK and Eurozone to assess the currency pair’s direction in the near term.
