The EUR/GBP currency pair is attempting to reverse its three-day losing streak, trading around 0.8470 during Monday’s European session, following the release of key economic data from Germany.
Germany’s IFO Business Climate index for August registered at 86.6, slightly exceeding market expectations of 86.5 but down from July’s 87.0. The IFO Current Assessment also aligned with forecasts at 86.5, though it marked a decrease from the previous month’s 87.1.
European Central Bank (ECB) Governing Council member Olli Rehn commented on Friday that the recent decline in inflation, coupled with ongoing economic weakness in the Eurozone, supports the case for a potential reduction in borrowing costs next month, according to Bloomberg.
The subdued economic growth in Europe, particularly within the manufacturing sector, adds weight to the argument for a September rate cut. Additionally, markets are considering how anticipated Federal Reserve rate cuts could influence European borrowing costs.
At the Jackson Hole symposium, Bank of England (BoE) Governor Andrew Bailey suggested that rate cuts might occur more swiftly than expected due to a faster-than-anticipated decline in inflation. However, Bailey stressed the importance of caution until inflation consistently aligns with targets, following last month’s reduction of the rate from 5.25% to 5.0%.
Despite this, speculation that the BoE’s policy easing may proceed more gradually compared to other major central banks is providing some support to the Pound Sterling (GBP).
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