The EUR/GBP cross is facing a downward trend around 0.8595 in the early European session on Friday. The UK economy has officially exited the recession as reports show a growth of 0.6% QoQ in Q1. National Statistics (ONS) revealed that the GDP of the nation experienced growth after a mild recession in the second half of 2023.
The Bank of England (BoE) has maintained the borrowing costs at 5.25% for the sixth consecutive meeting, hinting at a potential rate cut in the near future. BoE Governor Andrew Bailey mentioned the possibility of a rate cut in the following month but emphasized the need for more data on inflation, economic activity, and the labor market before making a decision. The Chief Economist, Huw Pill, expressed confidence in the initiation of an easing cycle over the upcoming meetings.
On the Euro front, the European Central Bank (ECB) Vice President, Luis de Guindos, has indicated that the central bank will not commit to any decisions beyond the planned June rate cut. Despite the transparency regarding the June decision, the uncertainty regarding future actions remains. Furthermore, ECB Council member Robert Holzmann highlighted the potential impact of the oil price shock on preventing the initiation of an interest rate turnaround in June.
The upbeat UK GDP data has attracted buyers for the Pound Sterling (GBP), leading to a downward pressure on the EUR/GBP cross. The strong growth performance of the UK economy in Q1 surpassed market expectations, causing a shift in investor sentiment towards the GBP. As a result, the EUR/GBP cross has experienced a reversal in its three-day winning streak, hovering around 0.8595 levels.
The release of positive UK GDP figures has influenced the movement of the EUR/GBP cross in the early European session. The anticipation of a potential rate cut by the Bank of England and the uncertainty surrounding the European Central Bank’s future decisions have added to the volatility in the currency pair. Traders and investors are likely to closely monitor economic indicators and central bank statements for further insights into the direction of the EUR/GBP cross in the upcoming sessions.
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