EUR/GBP holds below 0.8600 following the UK GDP data

The EUR/GBP cross snaps the three-day winning streak near 0.8595 during the early European session on Friday. The cross are lower following the upbeat UK Gross Domestic Product (GDP) for Q1. 

The UK economy has moved out of recession, National Statistics (ONS) showed Friday. The nation’s GDP grew by 0.6% QoQ in the first three months of the year, marking a return to growth after a mild recession in the second half of 2023. The figure came in stronger than the market expectation of 0.4% expansion in the first quarter. Additionally, the UK GDP expanded at an annual pace of 0.2% YoY in Q1 of 2024 from a 0.2% contraction in Q4 of 2023, above the consensus of 0% growth. In response to the upbeat data, the Pound Sterling (GBP) attracts some buyers and creates a headwind for the EUR/GBP cross. 

On Thursday, the Bank of England (BoE) left its borrowing costs on hold at 5.25% for the sixth meeting in a row, opening the door to a rate cut sooner than expected. During the press conference, BoE Governor Andrew Bailey noted that “a rate cut next month was a possibility.” However, he will wait for inflation, activity, and labour market data before making the decision. The BoE Chief Economist, Huw Pill, said that the UK central bank was more confident that they would begin easing the cycle over the next few meetings, although they needed more data. 

On the Euro front, European Central Bank (ECB) Vice President Luis de Guindos stated that the ECB won’t commit to what will happen beyond its planned June rate cut. “We have been very, very clear and transparent about our June decision,” said Guindos. Meanwhile, ECB Council member Robert Holzmann noted that the oil price shock can prevent the interest rate turnaround from starting in June. The less dovish tone from the ECB than the BoE is likely to cap the EUR/GBP’s downside in the near term.