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Ahead of BoE Decision, EUR/GBP Trades In The 0.8600 Area
The EUR/GBP exchange rate consolidates above 0.86 prior to the Bank of England (BoE) meeting. The economic data for the Eurozone indicated a varied outlook. On Thursday, market participants expected the BoE to increase its interest rate by 25 basis points to 5.25 percent.
The EUR/GBP cross hovers around 0.86 during Thursday's early Asian session. Before the Bank of England's (BoE) interest rate decision later in the day, market participants prefer to remain inactive.
Last week, the European Central Bank increased interest rates by 25 basis points to 4.25 percent. Christine Lagarde, president of the European Central Bank, stated that the central bank's medium-term inflation target will be 2%.
Regarding the data, the unemployment rate in Germany decreased to 5.6% in June, down from 5.7% the previous month and the estimate. The final HCOB Manufacturing PMI reading for the month of July was 38.8. The Eurozone HCOB Manufacturing data, meanwhile, matched the market consensus of 42.7.
This week, Germany's Retail Sales MoM decreased by 0.8% compared to the market consensus of -0.2% and the previous reading of 0.2%. Annually, the bloc's Retail Sales decreased 1.6% in June, compared to the expected 6.3% decline and May's -3.5% decline.
In contrast, the Pound Sterling (GBP) weakens as investors fret about a potential UK economic recession. However, a substantial deceleration in the headline UK Consumer Price Index (CPI), to 7.9% YoY in June from 8.7% in May, may necessitate a slower rate of rate hikes by the UK central bank.
On Thursday, market participants anticipated the BoE would increase its interest rate by 25 basis points to 5.25 percent. In its most recent meeting, the Bank of England (BoE) unexpectedly increased its Bank Rate by 50 basis points (bps) to 5.00%. The additional rate hike from the BoE exacerbates concerns regarding the Bank's most aggressive rate increases in three decades and their impact on the UK's economy, which exerts downward pressure on the Pound Sterling.
Ahead of time, market participants will attentively monitor the BoE's interest rate decision and statement. This event may indicate a distinct direction for the EUR/GBP pair. In the absence of top-tier economic data releases from the Eurozone, the primary driver of the EUR/GBP cross will be the GBP price dynamics.
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