EUR/GBP trades around 0.8580 on Thursday at the time of writing, showing little change on the day.
The pair lacks a clear direction as both the Euro (EUR) and the British Pound (GBP) benefit from monetary tightening expectations, with investors assessing persistent inflationary pressures in the Eurozone and the United Kingdom (UK)
European economic fundamentals continue to provide some support to the Euro. The sharp rise in European natural gas prices, linked to supply disruptions in the Middle East, is keeping inflation risks elevated and strengthening the case for further interest rate hikes by the European Central Bank (ECB) this year. The latest German data point in the same direction.
Germany’s Producer Price Index (PPI) rose 3% YoY in July, accelerating from the previous month and exceeding market expectations of 2.7%. This marks the fastest annual increase since April 2023. On a monthly basis, producer prices rebound by 1.1%, signaling persistent price pressures in the Eurozone’s largest economy.