EUR/GBP Holds Steady Amid Stagnant Growth and Hawkish Central Banks
The EUR/GBP exchange rate has remained relatively stable this week, showing little reaction to the recent GDP data releases from both the Eurozone and the UK.
According to the second estimate by Eurostat, the Eurozone economy expanded by 0.4% in the second quarter, matching forecasts and up from no growth in the previous quarter. On an annual basis, GDP growth accelerated to 1.0% from an upwardly revised 0.5%.
The UK economy also grew by 0.4% in the second quarter, meeting expectations but slowing from 0.6% in the first quarter. Annual growth improved to 1.2% from 0.9%, beating the 1.1% estimate.
Market analysts expect a September interest rate hike from the European Central Bank (ECB), with Nordea reiterating that they 'continue to expect three more 25bp increases, taking the deposit rate to 3%'. However, geopolitical developments could alter this trajectory, potentially leading to faster or slower rate increases.
The Bank of England (BoE) is likely to leave interest rates unchanged, with the pass-through from higher energy prices still limited. The next key event will be next week's Consumer Price Index (CPI) report, which will provide a fresh update on inflation.