The EUR/GBP pair has pared its intraday gains following the release of the HCOB Purchasing Managers Index (PMI) data from both the Eurozone and Germany, currently trading around 0.8430 during Wednesday’s European session. In August, the Eurozone Services PMI declined to 52.9, down from 53.3 in the previous month. Additionally, the Composite PMI dropped to 51.0, missing expectations and falling below the previous reading of 51.2, which was anticipated to remain steady.
In Germany, the HCOB Services PMI slipped to 51.2 in August, slightly below market expectations of no change from the prior 51.4 reading. Similarly, the Composite PMI fell to 48.4, just under the forecasted and previous reading of 48.5.
However, the upward momentum for the EUR/GBP pair may be constrained, as the Euro could face headwinds amid strong speculation that the European Central Bank (ECB) will implement an interest rate cut in September. This would be the ECB’s second rate reduction since it began its policy normalization process in June. Policymakers are optimistic that inflation will gradually return to the bank’s 2% target by 2025.
The EUR/GBP cross may continue to struggle as market participants do not anticipate a rate cut from the Bank of England (BoE) in its September meeting. However, traders are expecting a 25 basis points (bps) interest rate cut in November.
Global economic concerns have intensified following weak PMI data from the world’s two largest economies. All eyes are now on the upcoming PMI data from the United Kingdom (UK), which will be released later in the day.
