EUR/GBP steady near 0.8650 as UK GDP stalls, BoE decision looms

• EUR/GBP trades mildly positive near 0.8650, after failing to hold gains above 0.8660.
• UK GDP flat in July, Industrial and Manufacturing Output disappoint.
• Focus shifts to UK jobs data on Tuesday, CPI on Wednesday, and the BoE policy decision on Thursday.

The Euro (EUR) trades with a mild positive tone against the British Pound (GBP) on Friday, with EUR/GBP paring earlier gains after failing to sustain momentum above 0.8660. At the time of writing, the cross is trading around 0.8650 as investors digest sluggish UK Gross Domestic Product (GDP) data alongside cautious commentary from the European Central Bank (ECB).

The latest Office for National Statistics (ONS) figures show the UK economy stalled in July. UK GDP was flat in July (0.0% MoM), in line with forecasts but down from a 0.4% gain in June. Industrial Production rose just 0.1% YoY, well below the 1.1% consensus and only marginally better than June’s 0.2%. The biggest disappointment came from Manufacturing Output, which fell 1.3% MoM, missing expectations of flat growth and sharply reversing the 0.5% expansion recorded previously.

On the Euro side, the ECB left rates unchanged on Thursday, as expected, while policymakers delivered a cautious tone in follow-up remarks on Friday. Governing Council member Olli Rehn highlighted the need to stay vigilant against downside risks to inflation, citing lower energy prices and recent euro strength as potential drags. Meanwhile, Latvia’s Martins Kazāks flagged the December policy meeting as pivotal, given the release of new staff projections and the possibility of revisiting the inflation outlook.

Attention now shifts to next week’s UK data releases and the Bank of England (BoE) policy decision. The labour market report on Tuesday will provide fresh insight into wage dynamics and employment conditions, while Wednesday’s Consumer Price Index (CPI) figures will be critical in gauging whether inflation pressures are easing. Both releases arrive ahead of the BoE’s rate decision on Thursday, where policymakers are widely expected to keep the Bank Rate unchanged at 4.00%.