EUR/GBP DIVES FURTHER TO NEAR 0.8440 ON BOE SHALLOW POLICY-EASING PROSPECTS
- EUR/GBP extends its losing spree as the ECB seems prepared to cut interest rates again in September.
- The BoE is expected to follow a gradual interest rate cut approach.
- Investors await the flash Eurozone HICP data for August.
The EUR/GBP pair extends its losing spree for the fifth trading session on Tuesday. The cross weakens as the Pound Sterling (GBP) strengthens on expectations that the process of policy-easing by the Bank of England (BoE) in the remaining year would be slower than other central bankers from its major peers.
BoE Governor Andrew Bailey said the central bank would "be careful not to cut interest rates too quickly or by too much" in his speech at the Jackson Hole (JH) Symposium on Friday.
The BoE announced its first-ever interest rate cut on August 1, ending its two-and-a-half year-long restrictive monetary policy stance, as officials gained confidence that price pressures will return to the bank’s target of 2% sustainably.
Currently, financial markets expect that the BoE will deliver one more interest rate cut this year. The reasoning behind a shallow BoE policy-easing cycle is the improving United Kingdom’s (UK) economic outlook.
The economic outlook of the UK economy improved after flash S&P Global/CIPS PMI showed that activities in the manufacturing and the service sector rose at a faster-than-expected pace in August.
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