EUR/GBP Slides Below 0.8550 Ahead of BoE Governor Bailey’s Speech

EUR/GBP Falls Below 0.8550 Ahead of BoE Governor Bailey’s Speech

The EUR/GBP currency pair edged lower during Thursday’s early European trading hours, dropping to around 0.8525. The decline is driven by strong UK PMI data and increased Pound Sterling (GBP) demand, while traders await a speech by Bank of England (BoE) Governor Andrew Bailey for further policy clues.

UK Business Activity Beats Expectations

Fresh S&P Global UK Composite PMI data showed a modest expansion in business activity, rising to 50.7 in June from 50.3 previously and beating the expected 50.5. The improvement in the services sector, which accounts for the largest portion of the UK economy, was particularly notable — marking the fastest growth in three months and outperforming similar data from Germany and France.

This upbeat data strengthened the Pound across the board and weighed on the EUR/GBP pair, as investors scaled back expectations for aggressive BoE rate cuts.

BoE Governor Bailey Flags Labour Market Softening

While the PMI data showed resilience, BoE Governor Andrew Bailey noted earlier this week that the UK labour market is showing signs of softening, reinforcing expectations of a gradual path to monetary easing. The BoE held interest rates steady at 4.25% during its June policy meeting, though three members of the Monetary Policy Committee (MPC) voted for a rate cut.

Bailey’s speech later today is highly anticipated and could provide fresh forward guidance on the BoE’s policy trajectory.

Euro Remains Vulnerable Amid Soft Data

On the other side of the cross, the Euro (EUR) is facing broad weakness due to disappointing economic performance in key Eurozone countries like Germany and France. Sluggish growth and political uncertainty in the region continue to keep the common currency under pressure.

Conclusion

The EUR/GBP pair is likely to remain under pressure in the short term as UK economic indicators outperform their Eurozone counterparts and BoE communication continues to lean cautiously dovish. Traders should monitor Bailey’s upcoming remarks and Friday’s Eurozone inflation data for the next directional cue.

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