EUR/GBP holds positive ground above 0.8600 as UK economy shrinks again in May
EUR/GBP strengthens to around 0.8615 in Thursday’s early European session.
UK GDP contracted 0.1% MoM in May, weaker than expected.
The attention will shift to the developments surrounding the US-EU tariff policy.
The EUR/GBP cross trades in positive territory near 0.8615 during the early European session on Friday. The Pound Sterling (GBP) edges lower against the Euro (EUR) after the release of UK growth numbers. Investors will closely monitor the United States (US)-European Union (EU) tariff policy headlines for fresh impetus.
Data released by the Office for National Statistics (ONS) on Friday showed that the UK economy shrank 0.1% MoM in May, compared to a contraction of 0.3% in April. This figure came in worse than the estimation of a 0.1% expansion in the reported period.
The UK economy has shrunk for the second month in a row, increasing market expectations that the Bank of England (BoE) will cut interest rates by more than investors had projected earlier. This might drag the GBP lower in the near term.
Meanwhile, the monthly Industrial Production fell by 0.9% MoM in May versus -0.6% prior. This reading came in lower than the market consensus of 0%. The GBP attracts some sellers in an immediate reaction to the downbeat UK economic data.
The shared currency faces some selling pressure after US President Donald Trump announced a new tariffs policy, adding to the uncertainty around his evolving trade policy. Trump announced a 35% tariff rate for goods imported from Canada, beginning August 1, and threatened to impose blanket tariffs of 15% or 20% on most other trade partners. Trump added that the members of the EU would get letters notifying them of new tariff rates “today or tomorrow.”
Traders will closely monitor the developments surrounding the US-EU tariff policy as the bloc is the largest trading partner of the US. Meanwhile, uncertainty surrounding the trade deal between the EU and the US could weigh on the EUR against the GBP.
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