Eurgbp Drops On German Gdp

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Eurgbp Drops On German Gdp

Eur/Gbp Drops Below 0.8500 After German Gdp Release

EUR/GBP continues to drop lower and is now trading near 0.8460 on Tuesday. The recent weakness in the Euro against the GBP is due to the weak growth outlook in Europe. In fact, the weak growth in Europe has also raised the odds of rate cuts by the ECB starting from September.

So, if the ECB joins the rate-cutting bandwagon just like the US Federal Reserve, it will be bad news for the Euro. Now, the traders of EUR/GBP are looking forward to the release of EU inflation and German inflation for the month of August.

German Gdp In Line With Forecasts

Recently, the Q2 GDP data for Germany were released and showed a reading similar to the forecasts. Overall, the German economy contracted by 0.1% during Q2 on a q/q basis, the same as the previous reading. If we look at Germany's GDP numbers on an annual basis, the reading remains unchanged.

After the release of the German Q2 GDP, the Euro came under fresh selling pressure. As a result, we saw the EUR/GBP pair tumble low and move towards a new support level.

According to ECB member Rehn, inflation has slowed down along with the Eurozone economy. This is a sign that the central bank will have to lower the borrowing costs starting in September.

In fact, a lot of traders are now forecasting a 25 bps rate cut during September. So, it is only natural for the shared currency to turn bearish against the GBP.

According to BoE Bailey, they are optimistic about the progress of inflation but are also cautious! In simple words, they are happy with the progress of disinflation but are cautious when it comes to big changes in policy.

Right now, it seems that the BoE will be a little slower than other central banks when it comes to cutting the rates. This means we cannot expect some big upside moves in the EUR/GBP.

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