The EURGBP exchange rate will be affected by German inflation data tomorrow, followed by the UK’s growth update on Friday.
EURGBP – Weekly Chart
The EURGBP found support at 0.855, but it needs a catalyst to move higher and test resistance near 0.87.
The German GDP figures are due to be released tomorrow, and are predicted to be 6.2%, down from 6.4% last month.
The more significant release will be the UK’s gross domestic product (GDP) on Friday for the three months ending June. The forecast for the monthly figure is zero percent growth, while the year-on-year forecast is for a 0.5 percent increase.
Bank of England Governor Andrew Bailey raised the UK’s interest rate once more, but he was tight-lipped about the future path of rate hikes.
“I am not going to speculate on the future path of interest rates. This is because, as the report indicates, there is more than one way to bring inflation back to a sustainable level,” he said.
“We had some negative surprises in June, but some of that has turned around. In light of this, I don’t think there was a case for a 50 basis point rate hike today,” he added.
The speaker hopes that the path outlined in the report can be achieved, as it does not foresee a recession. However, they acknowledge that this is uncertain and that the future is unpredictable.
The EURGBP has found some support at its current levels, and the uncertainty over UK interest rates has kept it from rising further. If it becomes clear that the Bank of England has stopped raising interest rates, then the exchange rate could appreciate.
Bettina Orlopp, CFO of Commerzbank, said the ECB is likely to stop raising interest rates. “We will stick to the current rate of 3.75%,” she said.
The European Central Bank (ECB) increased interest rates in July, completing a year of rate hikes. ECB President Christine Lagarde stated that the central bank could either continue or pause rate hikes at its next meeting in September, but it would definitely not cut rates.