EUR/GBP hovers around 0.8550 with grappling to extend gains as PMI figures loom

• EUR/GBP treads water as markets take a breather ahead of PMI data from both economies.
• ECB officials adopt caution about committing to a rate-cut trajectory due to concerns over inflation rebound.
• The Pound Sterling receives support as last week’s economic reports have increased the odds of BoE maintaining current rates.

EUR/GBP hovers around 0.8540 during the early European session on Wednesday, grappling to extend its winning streak. The EUR/GBP cross may appreciate further as traders expect the European Central Bank (ECB) to gradually lower interest rates. However, ECB officials have been cautious about committing to a specific rate-cut schedule, given concerns that inflationary pressures might pick up again.

On Tuesday, the Harmonized Index of Consumer Prices (HICP) data from the European Monetary Union (EMU) reported no month-on-month change for July, as anticipated. Meanwhile, the Core HICP fell by 0.2%, aligning with the decline seen in June.

In the United Kingdom (UK), Public Sector Net Borrowing (excluding public sector banks) rose to £3.1 billion in July, up from £1.3 billion in the same month the previous year and far surpassing market expectations of £1.5 billion.

The Pound Sterling (GBP) receives support as last week’s UK inflation and employment reports have bolstered the argument for the Bank of England (BoE) to keep the interest rate at 5.0% during its upcoming September meeting. Rupert Thompson, Chief Economist at IBOSS, also noted, “The BoE is likely to leave rates unchanged at their September meeting, with the next rate cut probably postponed until November.”

Traders are set to closely monitor the Purchasing Managers Index (PMI) data from the United Kingdom, the Eurozone, and Germany, scheduled for release on Thursday. These reports could offer deeper insights into the economic conditions across both the UK and the Eurozone, potentially influencing policy decisions by their respective central banks.