The EUR/GBP pair is facing downward pressure, reaching a new almost three-week low near 0.8480. This decline is driven by the Euro weakening against the Pound Sterling following the release of disappointing Q2 Negotiated Wage Rates in the Eurozone. Expectations of further rate cuts by the European Central Bank (ECB) in September are also contributing to the Euro’s weakness.
The ECB initiated its policy-easing measures in June and is expected to cut interest rates again next month. Recent data revealed a slower growth rate in Negotiated Wage Rates, easing concerns about persistent inflation. Economists at ING noted that the ECB is hesitant to lower rates while wage growth remains high.
Despite positive flash Eurozone HCOB Composite Purchasing Managers’ Index (PMI) data for August, the Euro failed to gain strength. The overall activity expanded unexpectedly, driven by robust business activity in France but offset by contraction in Germany, the largest economy in the Eurozone.
On the other hand, the Pound Sterling is performing well against major currencies, supported by strong preliminary United Kingdom (UK) S&P Global/CIPS PMI data for August. The Composite PMI showed accelerated growth, fueled by increased activities in manufacturing and the service sector.
The Bank of England (BoE) recently cut interest rates, further boosting business activity in the UK. Another rate cut is anticipated later this year, enhancing the economic outlook for the Pound Sterling.
Euro FAQs
- EUR/USD is the most traded currency pair globally, followed by EUR/JPY, EUR/GBP, and EUR/AUD.
- The ECB plays a crucial role in setting interest rates and managing monetary policy for the Eurozone.
- Eurozone inflation data and economic indicators significantly impact the strength of the Euro.
- Data releases on GDP, PMIs, employment, and trade balance are essential for evaluating the Euro’s health.