Ella 
During early European trading on Wednesday, the EUR/GBP cross gained momentum above the 0.8600 mark. British economic growth data fell short of expectations, exacerbating market concerns about the impact of the Bank of England’s (BOE) aggressive interest rate hike on the British economy, which provided support for the euro’s rebound. The pair is currently trading around 0.8626, up 0.16% on the day.
Investors are divided on the European Central Bank’s (ECB) interest rate expectations, with about 40% expecting the ECB to raise interest rates at Thursday’s meeting. Still, if the unverified ECB news is accurate, the ECB may announce another rate hike this week. EUR/GBP is likely to strengthen, becoming a tailwind for the EUR/GBP cross. The European Central Bank (ECB) expects inflation in the euro zone to remain above 3% next year, Reuters reported, providing support for a tenth consecutive interest rate hike on Thursday.
On the other hand, the latest data released by the Office for National Statistics (ONS) on Wednesday showed that the UK’s gross domestic product (GDP) fell by 0.5% on a monthly basis in July, after growing by 0.5% in June, which was lower than expected for a month-on-month decline of 0.2%. The services index for the three months to July (July) was 0.1%, compared with the previous value of 0.1%.
Elsewhere, UK industrial production fell 0.7% on month in July, after rising 1.8% in June, missing expectations for a 0.6% decline. Manufacturing production fell 0.8% monthly in July from 2.4% in June, below consensus expectations for a 1% decline. Following the release of the data, the pound (GBP) lost its appeal relative to other currencies.
Next, market participants will continue to focus on industrial production in the euro zone. On Thursday, attention will turn to the European Central Bank’s monetary policy and U.S. retail sales. This event will provide clear direction for the EUR/GBP cross.
