EUR/GBP struggles to extend rally ahead of UK Q3 GDP data
- EUR/GBP faces an intermediate resistance near 0.8730, more upside remains likely.
- BoE Pill warned that higher interest rates for a sufficiently longer period could result in an excessive slowdown.
- Economists expected that the UK economy contracted by 0.1% in the third quarter of 2023.
The EUR/GBP pair faces some sell-off while extending a rally above 0.8730 as investors turn cautious ahead of the United Kingdom Gross Domestic Product (GDP) data for the third quarter of 2023. The cross has shown a sharp rally this week on hopes that the Bank of England (BoE) could discuss cutting rates sooner than other central banks.
BoE Chief Economist Huw Pill warned this week that higher interest rates for a sufficiently longer period could result in an excessive slowdown in the economy. While discussing rate cuts, Pill said that he expects rate cuts in mid-2024.
The UK economy is going through a vulnerable phase as labor demand has slowed significantly and Manufacturing and Services PMI have been contracting due to poor consumer spending. Meanwhile, investors await the UK factory data for September and Q3 GDP data.
As per the consensus, the UK economy contracted by 0.1% against 0.2% growth in the April-June quarter. Economists are expecting a weak performance as higher interest rates have forced home buyers to postpone investment in housing while firms have delayed expansion plans.
For the monthly UK factory data, the Manufacturing Production rose by 0.3% versus. de-growth of 0.8% in August. Industrial Production rose nominally by 0.1% against a 0.7% decline in a similar period.
On the Eurozone front, investors await the speech from European Central Bank (ECB) President Christine Lagarde at 12:30 GMT. ECB Lagarde is expected to guide interest rates and outlook on economic performance. The inflation in the shared continent is consistently easing due to higher interest rates but rates are needed to remain higher to ensure price stability.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
