EUR/GBP loses ground above 0.8600 ahead of German CPI data

• EUR/GBP remains on the defensive near 0.8625, ahead of Eurozone mid-tier data.
• The German Unemployment Rate remained flat at 5.9%, as expected.
• Traders anticipate that the Bank of England (BoE) will cut rates as soon as May 2024.

The EUR/GBP cross finds some support around the weekly low of 0.8610 and hovers around 0.8625 during the early European session on Thursday. The Eurozone HCOB Composite PMI, Services PMI for December, and German Consumer Price Index (CPI) will be released later on Thursday. These figures could trigger the volatility in the cross.

The German Statistics Office revealed on Wednesday that the nation’s Unemployment Change showed that the number of unemployed people increased by 5K from the previous reading of 21K, better than the estimation of 20K. Meanwhile, the German Unemployment Rate remained flat at 5.9% as expected.

On the British Pound front, the UK Manufacturing PMI came in at 46.2 in December versus 46.4 prior, missing the expectation of 46.4, S&P Global showed on Tuesday. Traders increase their bets that the Bank of England (BoE) will be forced to cut rates as soon as May as policymakers switch their focus from high inflation to a stagnant economy. This, in turn, might weigh on the British Pound (GBP) and cap the downside of the EUR/GBP cross.

Market participants will closely monitor the German inflation report for fresh impetus. The German Harmonized Index of Consumer Prices (HICP) for December is estimated to rebound to 3.8% YoY from 2.3% in the previous reading.