EUR/GBP stabilises above 0.8600 after UK GDP beats forecasts, Eurozone data falters

• EUR/GBP trades near 0.8605, stabilising above the 0.8600 psychological support after hitting a two-month low of 0.8596
• UK GDP grew 0.4% in June and 0.3% in Q2, both above forecasts, while Eurozone Q2 GDP matched expectations at 0.1% and employment growth slowed alongside a sharp drop in industrial production.
• Attention now turns to next Wednesday’s inflation data from both the UK and the Eurozone, which could set the tone for EUR/GBP’s next directional move.

The EUR/GBP cross hovers near 0.8605 on Thursday, stabilising after touching an intraday trough of 0.8596 — its weakest level since June 2 — as in-line Eurozone Gross Domestic Product (GDP) data lends the Euro (EUR) modest support above the 0.8600 psychological floor, trimming losses from an earlier slide driven by stronger-than-expected UK GDP figures that boosted the British Pound (GBP).

Data from the UK’s Office for National Statistics on Thursday showed the economy grew 0.4% MoM in June, sharply above the 0.1% forecast and rebounding from a 0.1% contraction in May. Preliminary estimates for the second quarter revealed 0.3% QoQ growth, beating expectations of 0.1% but easing from 0.7% in Q1. On an annual basis, GDP rose 1.2%, above the 1.0% consensus but slightly below the 1.3% pace seen previously.

In the Eurozone, Eurostat’s flash estimate showed GDP expanding 0.1% QoQ in Q2, matching market forecasts and unchanged from the prior reading. On an annual basis, growth held steady at 1.4%, also in line with expectations.

Eurozone employment rose0.1% QoQ in Q2, matching estimates but easing from 0.2% in Q1. On an annual basis, employment growth slowed slightly to 0.7% from 0.7% previously, in line with expectations.

June industrial production in the Eurozone dropped 1.3% MoM, a steeper fall than the 1.0% decline expected, reversing May’s upwardly revised 1.1% gain from 1.7%. On an annual basis, output growth slowed sharply to 0.2%, missing the 1.7% forecast and down from a revised 3.1% in May (previously 3.7%), highlighting persistent weakness in the bloc’s manufacturing sector.

Looking ahead, inflation data from both the UK and the Eurozone is due next Wednesday, which could set the tone for the next directional move in EUR/GBP as markets reassess monetary policy outlooks for the Bank of England (BoE) and the European Central Bank (ECB).