EUR/GBP extends gains near 0.8730 despite upbeat UK GDP

EUR/GBP recovers intraday losses and continues the winning streak that began on Monday. The cross spot trades around 0.8730 during the European session on Friday. However, the EUR/GBP cross faced a challenge after the upbeat economic data from the United Kingdom (UK) on Friday.

The UK Office for National Statistics released the preliminary Gross Domestic Product (GDP) for Q3, showing a consistent annual increase of 0.6%, surpassing the 0.5% expectations. However, the quarter-on-quarter GDP remains neutral, with a reading of 0.0%, contrary to the anticipated decline of 0.1%.

Pound Sterling (GBP) has exhibited weakness this week, driven by concerns that the Bank of England (BoE) might discuss rate cuts earlier than other central banks. BoE Chief Economist Huw Pill cautioned about the potential adverse effects of maintaining higher interest rates for an extended period, warning of an excessive slowdown in the economy. Discussing rate cuts, Pill indicated an expectation of such cuts in mid-2024.

The EUR/GBP cross could encounter challenges amid uncertainties surrounding the European Central Bank's (ECB) future policy actions. Market pricing indicates a 30% chance of a cut in March 2024. However, ECB Vice President Luis de Guindos stated on Thursday that it is too early to start discussing interest rate cuts.

Furthermore, China's inflation data for October indicated a decline compared to previous growth, signaling deteriorating economic conditions. This has contributed to a decrease in investor enthusiasm for riskier currencies, including the Euro.

Investors are focusing on ECB President Christine Lagarde's participation in an event in London on Friday. Lagarde's remarks and insights during the event can potentially provide valuable information and influence market sentiment, particularly regarding the ECB's perspective on economic and monetary scenarios.

(This story was corrected on November 10 at 11:56 GMT to say that market pricing indicates a 30% chance of a rate cut from the ECB in March 2024, not 2023.)