The EUR/GBP cross remained under pressure around 0.8375 in early European trading on Thursday. The euro weakened against the pound on weak Eurozone data. Later Thursday, Bank of England Deputy Governor Sarah Breeden will speak.
German unemployment rate remained stable at 6.3% in April, according to data released by the German Statistics Office on Wednesday. Meanwhile, the change in the number of unemployed in April increased by 34,000 from the previous value, higher than the market’s expectation of 11,000. The pessimistic data strengthened the case for the European Central Bank (ECB) to further ease monetary policy in June, which dragged down the euro.
ECB Governing Council member François Villeroy de Galhau said that the ECB may cut interest rates further as there is currently little pressure on consumer price increases. Bastien Freitag, an analyst at Rothschild Wealth Management, expects the ECB to cut interest rates by 25 basis points next week, reducing the deposit rate to 2.00%.
On the other hand, unexpectedly strong UK consumer price index (CPI) inflation and retail sales data prompted investors to reduce expectations for an August rate cut by the Bank of England. This in turn could provide some support for the pound and act as headwind for crosses.
According to Reuters, investors have reduced the probability of a BoE rate cut in August to 40%, down from 60% before the inflation data was released. However, interest rate futures pricing shows that by the end of 2025, investors expect the BoE to cut rates by about 37 basis points.
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