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EUR/GBP Gains For The Sixth Day In a Row As Investors Await Euzozone HICP And UK GDP
The EUR/GBP pair extends its uptrend and breaches the 0.8600 resistance level. The Eurozone's Retail Sales for June were uneven, while Germany's Factory Orders increased 3.0% YoY compared to a decline of -4.0% previously. Investors are anticipating the Eurozone HICP YoY and the UK GDP Q2 YoY.
During Monday's early Asian session, the EUR/GBP cross acquires momentum and trades on a positive note for the sixth consecutive day. The inflation data for the Eurozone and the growth rate for the United Kingdom are expected later on Tuesday and Friday, respectively. The cross is currently trading at 0.8631, a decrease of 0.02% for the period in question.
The most recent data from the Deutsche Bundesbank indicated that Germany's Factory Orders increased 3.0% year-over-year, compared to -4.4% previously, while the monthly figure increased 7.0%, compared to 6.2% previously and -2.0% market expectations. June Retail Sales in the Eurozone were uneven. The monthly figures decreased to -0.3% compared to 0.2% expected and 0.6% previously, while the annual figures improved to -1.4% compared to -1.7% market expectations and -2.2% previously.
In addition, on Thursday the Eurozone Producer Price Index (PPI) for June dropped to its lowest level in three years. The figure decreased -3.4% year-over-year versus -3.1% expected and -1.6% previously. The HCOB Composite PMI for the bloc declined from 48.9 to 48.6. In July, the services PMI decreased from 51.1 to 50.9.
Last week, the European Central Bank increased interest rates by 25 basis points to 4.25 percent. Christine Lagarde, president of the ECB, stated that the central bank will work towards attaining a 2% inflation target over the medium term. The ECB's hawkish position strengthens the Euro against its competitors.
The chief economist of the Bank of England (BoE), Huw Pill, predicted on Friday that interest rates would remain elevated for an extended period. He added that the central bank's reliance on data will increase, and policymakers will respond as the economy and data evolve.
In its August policy meeting, the Bank of England (BoE) raised interest rates by 25 basis points (bps) to a 15-year high of 5.25 percent from 5 percent. As inflation remains elevated, the markets anticipated that the BoE would likely increase interest rates twice more by the end of the year. 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.
Andrew Bailey, governor of the Bank of England, stated in the policy outlook that the central bank anticipates inflation to decline to approximately 5% in October. There is no predicted future path for interest rates, he added. Nonetheless, the pessimistic economic outlook and the fear of recession in the United Kingdom exert pressure on the British Pound and function as a tailwind for the EUR/GBP cross.
Tuesday's release of the Eurozone Harmonised Index of Consumer Prices YoY for July will serve as a guide for market participants. On Friday, the focus will transition to the preliminary Q2 Gross Domestic Product for the United Kingdom. These data may indicate a distinct direction for the EUR/GBP exchange rate.
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