EUR/GBP traded little changed around 0.8730 in Asian hours on Thursday, with investors cautious ahead of the German GfK Consumer Confidence Survey. The cross struggled to gain traction after weak German business sentiment data weighed on the euro (EUR).
Euro pressured by weak German sentiment
Germany’s IFO Business Climate Index fell unexpectedly to 87.7 in September from 89.0 in August, undershooting expectations of 89.3. The reading came on the heels of a mixed HCOB PMI survey, which showed Eurozone private sector growth driven by services while manufacturing slipped back into contraction.
The disappointing data has dampened confidence in the euro, keeping EUR/GBP under pressure in the near term.
UK data softens, weighing on sterling outlook
The British pound (GBP) has also lacked strong direction after weaker UK PMI figures signaled slowing momentum in business activity. The flash S&P Global Composite PMI eased to 51.0 in September from 53.5 in August, missing the 52.7 forecast. Manufacturing PMI dropped to 46.2 versus expectations of 47.0, while Services PMI slipped to 51.9 from 54.2, against a consensus of 53.5.
The soft data points to cooling labor market conditions and weaker overseas demand, factors that could push the Bank of England (BoE) toward a more dovish policy stance.
BoE commentary offers limited support
BoE Chief Economist Huw Pill said this week that he is more comfortable with the inflation outlook than earlier in the year, though he acknowledged risks remain skewed toward the upside. His remarks, delivered in Geneva at an event hosted by the Pictet Research Institute, did little to shift market expectations for steady policy in the near term.
