EUR/GBP extends losses below 0.8700 with BoE interest rates coming into view

The Euro drifts lower as the Pound bounces from lows heading into this week's BoE monetary policy decision.
The Bank of England is expected to cut interest rates by 25 basis points to 4%.
In the Eurozone, July's final HCOB Services PMI has been revised down to 51.0 from the previous 51.2.

Guillermo Alcala FXStreet

The Euro trades lower for the second consecutive day on Tuesday, exploring levels sub-0.8700 as the Pound trims some losses, with investors shifting their gaze to the Bank of England’s monetary policy decision, due next Thursday.

The weak UK employment and Gross Domestic Product figures seen in July have boosted market expectations that the Bank of England will cut rates by 25 basis points, leaving its benchmark rate at 4%, after Thursday’s meeting.

The BoE is expected to ease monetary policy further

Recent monetary policy meetings, however, have revealed a split committee, with the hawkish party showing its concern about the heating inflationary trends. The possibility of leaving rates unchanged seems remote but is not completely discarded. Such an outcome would send the Sterling rallying.

The Euro, on the other hand, remains moderately weak, weighed down by a lopsided trade deal with the US and signs of deterioration in the bloc’s leading economies. The final Eurozone Services PMI has been revised lower to a 51.0 reading from the preliminary estimations of 51.2.

Later on the day, S&P Global will release the final reading of the UK Services PMI. Preliminary estimations pointed to a slowdown to 51.2 from the previous month’s 52.8 reading.

Economic Indicator

HCOB Services PMI

The Services Purchasing Managers Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging business activity in the Eurozone services sector. As the services sector dominates a large part of the economy, the Services PMI is an important indicator gauging the state of overall economic conditions. The data is derived from surveys of senior executives at private-sector companies from the services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity among services providers is generally declining, which is seen as bearish for EUR.

Economic Indicator

S&P Global Services PMI

The Services Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging business activity in the UK’s services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Pound Sterling (GBP). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for GBP.

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