EUR/GBP holds positive ground near 0.8650, investors await UK GDP data
- EUR/GBP remains firm around 0.8650 in Wednesday’s early European session.
- EU ZEW Economic Sentiment plunges in August, which might cap the EUR’s upside.
- Investors pare bets on BoE rate cut after UK jobs data.
The EUR/GBP cross trades on a stronger note near 0.8650 during the early European session on Wednesday. The Euro (EUR) edges higher against the Pound Sterling (GBP) on potential talks between US President Donald Trump and Russian President Vladimir Putin in Alaska on Friday to end sanctions. The preliminary reading of the UK Gross Domestic Product (GBP) for the second quarter (Q2) will be closely watched later on Thursday.
The United States (US) and Russia have agreed to hold a meeting between Trump and Putin on Friday to discuss how to end the war in Ukraine. Trump announced the meeting a week beforehand, the same day as his deadline for Russia to agree to a ceasefire in Ukraine or face more US sanctions.
Trump announced the meeting a week in advance, the same day he set a deadline for Russia to agree to a ceasefire in Ukraine or face further US sanctions. Meanwhile, optimism surrounding US-Russia talks continues to underpin the shared currency.
However, the downbeat ZEW Survey of Expectations for August from the Eurozone and Germany released on Tuesday might cap the upside for the cross. The Eurozone ZEW Economic Sentiment plunged to 25.1 in August from 36.1 in July, while Germany’s ZEW Economic Sentiment fell to 34.7 in August versus 52.7 prior. Both readings came in below the market consensus.
On the GBP’s front, the UK jobs market has weakened again, but wage growth remains strong, prompting traders to trim their bets on the possibility of another Bank of England (BoE) rate cut this year. Markets are now fully pricing another reduction only in February 2026, according to LSEG data. The cautious stance of the UK central bank might lift the GBP against the EUR in the near term.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.