EUR/GBP hovers around the 0.8600 area ahead of BoE decision – by lilyfinancial EURGBP Crosses BOE
The European Central Bank raised interest rates by 25 basis points to 4.25% last week.President Christine Lagarde stated that the central bank will move towards achieving a medium-term inflation target of 2%.
About the data, the German unemployment rate fell to 5.6% in June from the 5.7% estimated and previous month. The final HCOB Manufacturing PMI report for July came in at 38.8. Meanwhile, theEarlier this week, Germany's Retail Sales MoM decreased by 0.8% against the market consensus of -0.2% and 0.2% prior. The bloc's Retail Sales fell 1.6% annually in June, compared to the expected 6.3% decline and May's -3.6% decline.
On the other hand, the Pound Sterling weakens as investors worry about a possible recession in the UK economy. That said, a significant deceleration in the headline UK, to 7.9% YoY in June from 8.7% in May, might require the UK central bank to hike rates at a slower pace. Market participants anticipated the BoE would raise its interest rate by 25 bps to 5.25% on Thursday. It’s worth noting that the unexpectedly raised its Bank Rate by 50 basis points to 5.00% in the last meeting. The additional rate hike from the BoE exacerbates concerns about the Bank's most aggressive rate hikes in three decades and their impact on the UK’s economy, which exert pressure on the Pound Sterling.
Looking ahead, market players will closely watch the BoE interest rate decision and the statement. This event could provide hints for a clear direction in EUR/GBP. In the absence of top-tier economic data releases from the Eurozone, the GBP price dynamic will be the main driver for the
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