- The EUR/GBP weakens about 0.8575 in the early European session on Tuesday.
- German inflation data weaker than expected weigh on the euro.
- The preliminary reading of the Inflation data of the IPCA of the Eurozone and the Bailey speech of the BOE will be closely followed on Tuesday.
The EUR/GBP crossing attracts some sellers around 0.8575 during the early European session on Tuesday. The euro (EUR) weakens in front of the sterling pound (GBP) due to the weakest German inflation data than expected. The operators will take more clues of the preliminary reading of the inflation data of the eurozone and the speech of the governor of the Bank of England (BOE), Andrew Bailey, later on Tuesday.
The preliminary data of the German statistics office on Monday revealed that German inflation, measured by the harmonized consumer prices index (IPCA), was reduced to 2.0% year -on -year in June from 2.1% in the previous reading. This figure was weaker than the 2.2% expected.
In monthly terms, the IPCA increased 0.1% in June, compared to 0.2% in May, below the market consensus of 0.3%. German inflation readings weaker than expected could weigh on the shared currency in the short term.
The BOE is expected to cut interest rates three times by the end of 2025, reducing them to 3.5% to combat slow economic growth and a weaker labor market. Rate cuts are anticipated in August, September and November 2025, with probable quarterly reductions.
The governor of the BOE, Andrew Bailey, said last week that there were now signs that the United Kingdom labor market was weakening, and emphasized that interest rates are likely to continue falling. The moderate expectation of the Central Bank of the United Kingdom could help limit the decline for the crossing.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
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.
