EUR/GBP declines to monthly low at 0.8540 on falling UK inflation

EUR/GBP continues to experience losses, trading near the monthly low at 0.8540 during the Asian session on Thursday. The EUR/GBP downward trajectory is further driven by better-than-expected inflation figures from the United Kingdom (UK) on Wednesday.

UK's economic indicators are intensifying worries about the likelihood of additional interest rate hikes by the Bank of England (BoE) in the September meeting. That said, the UK Consumer Price Index (CPI) for July fell 0.4% on a monthly basis, less than the projected 0.5% decline and after increasing 0.1% in June. On an annual basis, the CPI came in at 6.8%, consistent with expectations and a slight decrease from the prior 7.9%. Furthermore, the Core CPI – which excludes volatile items – remained steady at  6.9%, broadly aligning with the anticipated 6.8%.

On the other hand, the Eurozone released top-tier data on Wednesday that showed a moderate performance of the economy. The Gross Domestic Product (GDP) data matched expectations and showed the economy grew in the second quarter at the same pace it did in the first three months of the year. GDP growth steadied at 0.3% on quarter and 0.6% on year. Additionally, the Eurozone saw employment increase by 0.2% on quarter in Q2, less than previous quarter's 0.6% advance. The dataset did not contribute to stemming the Euro's weakness against the Pound Sterling.

Market participants will closely monitor the forthcoming data releases, beginning with the Eurozone Trade Balance later in the day, followed by the Harmonized Index of Consumer Prices (HICP) scheduled for release on Friday. Additionally, Friday's agenda includes a speech by Chief Economist Philip Richard Lane from the European Central Bank (ECB) and UK Retail Sales data. These events are anticipated to provide valuable perspectives on the trajectories of both economies. As a result, they could have a significant impact on trading decisions concerning the EUR/GBP pair.