As the Eurozone inflation remains soft, the EUR/GBP pair is facing its third consecutive week of losses. The Euro (EUR) is weakening, with market participants anticipating another interest rate cut by the European Central Bank (ECB) in September following the previous cut in June.
The ECB is highly likely to lower its key borrowing rates next month as inflation in the Eurozone has decreased in August, and the economic outlook is uncertain. There are concerns that the German economy might enter a recession, adding to the pressure for a rate cut.
Recent data from the Flash Eurozone Harmonized Index of Consumer Prices (HICP) for August showed a slowdown in both headline and core inflation, with core HICP rising slightly month-on-month. Market expectations for an ECB rate cut in September were reinforced by German HICP returning to the bank’s target of 2%.
On the other hand, the Pound Sterling (GBP) remains strong against major currencies, as the Bank of England (BoE) is expected to reduce interest rates further. The BoE is likely to deliver one more rate cut this year, in contrast to its recent stance towards policy normalization.
Analysis:
The EUR/GBP pair is under pressure due to a weakening Euro and expectations of an ECB rate cut, while the GBP remains strong on anticipated BoE policy easing. Investors should monitor upcoming central bank meetings and inflation data releases to gauge the impact on currency markets and adjust their investment strategies accordingly.