• EUR/GBP is expected to rise beyond the psychological threshold of 0.8700.
  • The Euro gained strength from Eurozone PMI data.
  • The unexpected decision by the Bank of England (BoE) to suspend its rate hiking cycle has weakened the Pound Sterling (GBP).

EUR/GBP extends its winning streak that began on Wednesday, trading higher throughout the Asian session on Monday around the 0.8700 psychological barrier. The pair is still seeing upward support following the release of Eurozone PMI data, as well as the previous week’s dovish policy decision by the Bank of England (BoE).

The HCOB Services PMI increased to 48.4 in September from 47.9 in August, exceeding the expected estimate of 47.7. The Eurozone PMI Composite increased to 47.1 in September from 46.7 in August, beating the expected number of 46.5 and reaching a two-month high.

The Eurozone Manufacturing Purchasing Managers Index (PMI) fell to 43.4 in September, below the market consensus of 44.0 and the prior reading of 43.5, according to the HCOB Purchasing Managers’ Index survey.

On early Friday, European Central Bank (ECB) Chief Economist Phillip Lane stressed that inflation above 2% is costly to the economy and that central banks want to keep inflation under control in the medium term.


EUR/GBP Price Chart – Source: Tradingview
EUR/GBP Price Chart – Source: Tradingview

Furthermore, the Bank of France President Francois Villeroy de Galhau spoke in a weekend interview that he is in no rush to raise rates further after hiking to 4.00% last week, according to Bloomberg.

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Furthermore, economists polled by Reuters expect the ECB to end its rate-hike cycle and remain on hold until at least July of next year.

According to weekend rumors, the windfall tax on Italian banks, which has already been cut since its adoption in August, may be effectively repealed. Instead of paying the tax, which would have been 40% of additional profits from 2021 to 2023, banks may theoretically avoid it by allocating 2.5 times the tax to boost Tier 1 capital levels.

On the United Kingdom’s (UK) side, the Bank of England (BoE) opted not to proceed with a widely anticipated interest rate hike on Thursday, citing lower-than-expected inflation numbers for the UK economy.

The unexpected decision by the Bank of England (BoE) to suspend its rate hiking cycle has contributed to the British Pound’s (GBP) relative underperformance. This trend is also seen as placing negative pressure on the EUR/GBP pair. It’s worth mentioning that the Bank of England had previously raised interest rates 14 times in a row.

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