EUR/GBP is trading in negative territory for the fifth consecutive day around 0.8460 in Tuesday’s early European session. The German economy contracted 0.1% QoQ in Q2, in line with estimates, putting pressure on the Euro. BoE’s Bailey remains cautious on inflation, impacting the Pound Sterling.
The Euro weakens as the Eurozone growth outlook remains sluggish, leading to expectations of more rate cuts from the ECB in September. Attention now turns to the upcoming inflation data releases for Germany and the Eurozone. The recent German GDP report showed a contraction of 0.1% QoQ in Q2, aligning with market expectations. The annual GDP figure remained unchanged compared to the same quarter last year, causing the Euro to face selling pressure.
ECB member Olli Rehn’s comments on slowing inflation and weak Eurozone economy support the case for a rate cut in September, further weighing on the Euro. Meanwhile, BoE Governor Bailey’s cautious optimism on inflation hints at a slower policy-easing cycle compared to other central banks, providing support to the Pound Sterling and acting as a headwind for EUR/GBP.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy, usually comparing GDP to the previous quarter or the same period in the previous year. A higher GDP result is positive for a nation’s currency as it reflects a growing economy. When an economy grows, people tend to spend more, leading to inflation. Central banks raise interest rates to combat inflation, attracting more capital inflows and supporting the local currency.