- The EUR/GBP pair is trading slightly lower as the British Pound outperforms the Euro.
- The final British manufacturing PMI estimate is revised above 50, signifying growth in the sector.
- The interest rate outlook for the Eurozone and the UK are very similar, leading to range-bound dynamics.
EUR/GBP retreated to 0.8550 on Tuesday following good UK manufacturing data. However, the pair remains in the center of its long-term range that extends along 0.8500.
The final S&P Global/CIPS March manufacturing PMI reading showed a revision above the 50 level, which distinguishes growth from contraction, and surpassed the preliminary estimate of 49.9, according to S&P Global data. It is the first time since 2022 that the indicator exceeds 50 points.
In comparison, the Eurozone manufacturing sector did not exceed the level of 50, although it was also above preliminary estimates. The Eurozone HCOB Manufacturing PMI rose to 46.1 in March, beating the preliminary estimate of 45.7.
UK house prices came in lower than expected despite rising mortgages
On Tuesday, data from Nationwide, the UK's largest building society, showed British house prices rose 1.6% year-on-year in March, below estimates of 2.4% but up from 1.2% in February.
On a monthly basis, prices fell 0.2% after rising 0.7% in February, and below estimates of 0.3%.
Despite falling house prices, UK mortgage approvals rose by 60,332,000, above the expected 56,500,000 and above, according to data from the Bank of England (BoE). .
Borrowing was mixed according to BoE data, with net mortgage lending rising but consumer credit falling in the UK. Consumer credit fell to £1.378 billion lent in February, below forecasts of £1.6 billion and the previous figure of £1.77 billion.
For its part, the Euro seemed unfazed by the publication of lower-than-expected German inflation data, which showed a slowdown in the Harmonized Index of Consumer Prices to 2.3% annually in March, when 2.4% had been forecast. , compared to the previous 2.7%.
Similar outlook for interest rates
Similar interest rate outlooks in the two jurisdictions – an important factor for currency markets – do little to change EUR/GBP's habit of swinging between tepid gains and losses over the past two months.
Based on comments from BoE Governor Andrew Bailey, market forecasts of three 0.25% cuts in 2024 are reasonable given that the BoE sees no significant inflationary pressures. Lower interest rates are negative for the pound as they reduce foreign capital inflows.
His statements fuel expectations that the BoE will implement interest rate cuts in June, consequently putting downward pressure on the British Pound (GBP).
The European Central Bank (ECB) is also expected to cut interest rates in June. Over the Easter weekend, ECB monetary policy chief Robert Holzmann indicated that interest rate cuts in June are likely, but are subject to developments in wage and price data.
Furthermore, ECB Governing Council member Yannis Stournaras said on Sunday that there could be a total of four interest rate cuts (0.25%) in 2024, representing a cumulative reduction of 100 basis points (bp) to End of the year.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
