The EUR/GBP pair retraced its recent gains during Monday’s Asian session, trading around 0.8340. This pullback comes in response to the release of the UK’s second-quarter Gross Domestic Product (GDP) figures, which fell short of expectations.
The UK’s GDP grew by 0.5% quarter-over-quarter, slightly below the forecasted 0.6% increase. Annually, the economy expanded by 0.7%, also missing expectations of 0.9% growth. This disappointing data contributed to a lackluster performance in the EUR/GBP cross.
The Euro faced additional pressure due to mounting speculation that the European Central Bank (ECB) may implement another interest rate cut in October. Investors are closely watching upcoming economic data from Germany, particularly September’s preliminary Consumer Price Index (CPI) report, for further clues on the ECB’s policy direction.
Weaker-than-expected inflation figures from France and Spain have bolstered expectations of a third ECB rate cut since the central bank resumed its policy-easing cycle in September. France’s year-over-year inflation rate for September came in at 1.5%, well below the forecasted 1.9% and a significant drop from the 2.2% reading in August. On a monthly basis, French inflation declined by 1.2%, exceeding predictions of a 0.8% drop.
Similarly, Spain’s Harmonized Index of Consumer Prices (HICP) increased by 1.7% year-over-year, missing the forecast of 1.9% and down from 2.4% in August. Month-on-month, Spanish inflation fell by 0.1%, contrary to expectations of no change. These subdued inflation figures further reinforce the likelihood of continued monetary easing by the ECB.
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