EUR/GBP finds temporary support near 0.8350 after ECB accounts release

• EUR/GBP finds interim support near 0.8350 after the release of accounts from the ECB’s monetary policy meeting.
• The ECB is expected to further cut its lending rates by 50 bps over the rest of the year.
• Investors await UK monthly GDP and factory data to project the pound’s next move.

EUR/GBP finds temporary support near 0.8350 in the first North American session on Thursday. The cross finds buying interest following the release of the European Central Bank (ECB) monetary policy meeting accounts for the September meeting. The minutes showed that policymakers expect euro zone inflation to rise again in the latter part of the year.

The ECB’s accounts also indicated that inflation was on track to return to the bank’s 2% target, but refrained from announcing a victory over it.

However, the outlook for the euro (EUR) is expected to remain weak, as the sharp fall in euro area harmonized consumer prices (IAPC) data for September to 1.8% and worsening risks to economic growth drove expectations regarding several interest reductions. For the rest of the year, traders expect the ECB to further cut interest rates by 50 basis points (bps), suggesting the ECB will cut its deposit facility rate by 25 bps next week and again in December.

At the September meeting, officials noted a faster-than-expected slowdown in wage growth. The board expects wage growth to slow even more rapidly next year. This would keep price pressures in check and expect more interest rate cuts immediately.

In the United Kingdom (UK), the pound sterling (GBP) will be influenced by monthly Gross Domestic Product (GDP) and factory data for August due out on Friday. Economists expect Britain’s economy to have grown by 0.2% after being flat in July.

For the Bank of England (BoE) interest rate outlook, traders expect the bank to cut interest rates once in either of the two remaining policy meetings this year by 25 bps.