- EUR/GBP fell for the second day in a row and fell to a one-year low on Wednesday.
- Disappointing German PMIs reaffirm expectations for ECB rate hike pause and put pressure on pair.
- Expectations of further rate hikes by the BoE support the prospects of a new short-term bearish move in the pair.
EUR/GBP comes under strong selling pressure during the early hours of the European session on Wednesday and falls to 1-year lows in reaction to disappointing German PMI data. However, the pair manages to bounce a few pips in the last hour and currently trades with modest intraday losses, just above the 0.8500 psychological level.
The preliminary business activity report from the HCOB survey showed that the recession in German manufacturing eased somewhat in August and the service sector contracted unexpectedly during the month. In fact, the HCOB Manufacturing PMI came in at 39.1, versus 38.7 expected and 38.8 reported in July. In addition, the services PMI fell sharply from 52.3 to 47.3 in August, below estimates for a reading of 51.5 and hitting a new nine-month low.
These data aggravate concerns about a further economic recession and fuel speculation that the European Central Bank (ECB) will end its streak of nine consecutive interest rate hikes in September. This, in turn, weighs on the common currency and drags the EUR/GBP pair lower for the second day in a row. That being said, the appearance of some selling around the British Pound (GBP) lends support to the pair and leads to a modest 15-20 pip bounce from the daily low.
However, the fall of the Pound sterling seems supported by the increase in expectations of new interest rate hikes by the Bank of England (BoE). In fact, current market prices indicate a greater than 80% probability of a 25 basis point hike at the next BoE meeting in September. This, in turn, suggests that the path of least resistance for the EUR/GBP is to the downside and any significant recovery attempt could still be seen as a selling opportunity.
EUR/GBP technical levels to watch
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.
