- EUR/GBP prints a fresh three-week low at 0.8620 as the ECB is expected to keep policy steady ahead.
- The Eurozone GDP for Q3 is expected to contract due to the consequences of higher interest rates.
- The Pound Sterling will dance to the tune of the UK factory data.
The EUR/GBP pair printed a fresh three-week low at 0.8620 on Wednesday as European Central Bank (ECB) Governing Council member and Bank of France President, Francois Villeroy de Galhau see monetary policy sufficiently restrictive.
ECB Villeroy warned that further policy tightening is not the right thing at this time amid a positive oil price outlook due to escalating Middle East tensions.
Meanwhile, the Eurozone economy is underperforming on the grounds of employment, output, and consumer spending, which are consequences of higher interest rates by the central bank. ECB policymaker Pablo Hernandez de Cos expects a negative reading of Gross Domestic Product (GDP) in the third quarter of 2023.
ECB policymakers have been emphasizing the need to keep interest rates higher for a longer period as the last leg of inflation could turn out sticky ahead. A survey from the ECB showed that Eurozone consumers see inflation three years ahead at 2.5% in August vs. 2.4% in July.
On the Pound Sterling front, investors await the United Kingdom factory data, which will be released on Thursday at 06:00 GMT. Investors see monthly Manufacturing Production contracting by 0.3% against the 0.8% contraction recorded for July. Monthly Industrial Production is foreseen to decline at a slower pace of 0.2% against a contraction of 0.7% in July. The monthly Gross Domestic Product (GDP) data is seen expanding by 0.5% against a decline of 0.5% in July.
Investors seem confused about the interest rate outlook after hawkish guidance from Bank of England (BoE) policymaker Katherine Mann, which supported for aggressively tightening approach this week. She discussed the need to bring down inflation to 2% and wipe out consumer inflation expectations.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in daily range near 1.0800 after US PPI data
EUR/USD continues to fluctuate at around 1.0800 in the second half of the day on Tuesday. The data from the US showed that the annual producer inflation rose to 2.2% in April as expected, helping the USD stay resilient against its rivals and limiting the pair's upside.
GBP/USD holds steady at around 1.2550 ahead of Powell speech
GBP/USD struggles to build on Monday's gains and trades near 1.2550 on Tuesday. The UK data showed that the Unemployment Rate edged higher to 4.3% in the three months to March as forecast. Meanwhile, annual producer inflation in the US rose to 2.2% in April.
Gold clings to daily recovery gains above $2,340
Following Monday's decline, Gold stabilizes in positive territory above $2,340 on Tuesday. The benchmark 10-year US Treasury bond yield stays below 4.5% after April producer inflation data, allowing XAU/USD to hold its ground.
Ethereum knocking at support’s door
Crypto market capitalisation rose 0.8% over the past 24 hours to 2.2 trillion, but growth exceeded 2% for most of the period. However, it dipped at the start of active European trading, temporarily returning to levels of a day ago.
Entering a crucial run of data for financial markets
We are entering a crucial period for financial markets and forecasters as Americans' near-term inflation expectations rise again. Upcoming reports on the CPI and PPI for April, along with new data on retail sales and industrial production, will provide valuable insights.