The EUR/GBP pair has retraced recent gains, trading around 0.8520 during the early European hours on Tuesday. This comes as investors await potential interest rate cuts by the European Central Bank (ECB). However, ECB policymakers are hesitant to commit to a specific rate-cut path due to concerns that price pressures could reaccelerate.
In Germany, the Producer Price Index (PPI) fell by 0.8% year-over-year in July, following a 1.6% decrease in the previous month. The monthly index also showed a 0.2% increase, in line with expectations. Investors are now turning their attention to the Harmonized Index of Consumer Prices (HICP) data from the European Monetary Union (EMU), which is set to be released later in the day.
Last week’s UK inflation and employment reports have bolstered the case for the Bank of England (BoE) to maintain its interest rate at 5.0% in the upcoming September meeting. Finance Minister Rachel Reeves stressed the challenges facing the new government and the need for tough decisions to improve the country’s economic fundamentals. Chief Economist Rupert Thompson at IBOSS predicts that the BoE is likely to keep rates unchanged in September, with a potential rate cut delayed until November.
Traders will closely monitor the Purchasing Managers Index (PMI) data from the Chartered Institute of Procurement & Supply and S&P Global, set for release on Thursday. This report could provide further insights into the UK’s economic conditions and potentially influence the Bank of England’s policy stance. Overall, the anticipation of further rate cuts by the BoE could exert pressure on the Pound Sterling (GBP) in the near term.
