As the European session kicks off on Friday, the EUR/GBP cross continues to trade in negative territory near 0.8485. The preliminary UK August PMI data exceeded expectations, leading to a delay in the anticipated Bank of England (BoE) rate cut. On the other hand, investors are anticipating two more rate cuts from the European Central Bank (ECB) before the year ends.
The recent survey revealed that business activity in the UK experienced its strongest growth in four months, accompanied by easing price pressures. The Composite Purchasing Managers’ Index (PMI) climbed to 53.4 in August, surpassing the previous month’s 52.8 and expectations of 52.9. This positive report has reduced the likelihood of a BoE rate cut in September, strengthening the GBP against the EUR. Following this data, financial markets are now pricing in less than a 30% chance of a rate cut next month.
Conversely, the ECB has hinted at a potential rate reduction later this year, with investors already pricing in a 90% probability of a 25 bps cut in the deposit rate to 3.5% in September. Additionally, expectations are for at least one more rate cut before the year ends. This outlook has weighed on the EUR, with ECB Governing Council member Martins Kazaks expressing readiness to discuss another rate cut at the upcoming September meeting.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency globally, dating back to 886 AD and serving as the official currency of the United Kingdom. It accounts for 12% of all foreign exchange transactions, averaging $630 billion daily. The key trading pairs include GBP/USD, GBP/JPY, and EUR/GBP. The value of the GBP is significantly influenced by the monetary policy decisions of the Bank of England, primarily focused on maintaining price stability through interest rate adjustments. Economic indicators such as GDP, PMIs, and trade balance data also impact the GBP’s value.