- EUR/GBP softens to near 0.8700 in Wednesday’s early European session.
- The final HCOB Eurozone Composite PMI declined to 50.9 in July, weaker than expected.
- The BoE is set to cut rates at its August meeting on Thursday.
The EUR/GBP cross trades in negative territory around 0.8700 during the early European session on Wednesday. The Euro (EUR) edges lower against the Pound Sterling (GBP) due to weaker Eurozone Purchasing Managers Index (PMI) data. Traders await the Eurozone June Retail Sales data, which is due later on Wednesday.
Data released by the Federal Statistics Office on Wednesday showed that Germany’s Factory Orders unexpectedly declined in June, suggesting that the country’s manufacturing sector downturn extended. The downbeat economic data and sluggish economic growth in the Eurozone might prompt the European Central Bank (ECB) to remain cautious about delivering further rate cuts too quickly.
Furthermore, the final HCOB Eurozone Composite PMI for July declined to 50.9 from 51.0 in June. This reading came in below the market consensus of 51.0. The Eurozone Services PMI eased to 51.0 in July, versus 51.2 prior, weaker than the 51.2 expected.
The outcome of the European Union (EU) and the United States (US) trade talks remains uncertain. The EU announced Monday that it will suspend for six months its planned countermeasures against the US tariffs, which were set to take effect this week. Any signs of escalating trade tensions could drag the EUR lower against the GBP.
All eyes will be on the Bank of England (BoE) interest rate decision on Thursday. The BoE is expected to lower its base rate by 25 basis points (bps) to 4.00% at its August Monetary Policy Committee (MPC) meeting, which will be the third cut of 2025. Financial markets have priced in more than 80% odds of BoE rate cuts at the August meeting and are penciling in a further quarter-point reduction before the end of the year, according to Reuters.
