EUR/GBP slips further to near 0.8440 on shallow BoE policy easing prospects

• EUR/GBP extends losses as ECB looks set to cut interest rates again in September.
• The BoE is expected to follow a gradual interest rate cut approach.
• Investors await flash Eurozone HICP data for August.

The EUR/GBP pair extends its losses for a fifth session on Tuesday. The cross is weakening as the pound sterling (GBP) strengthens on expectations that the Bank of England’s (BoE) easing process in the remaining year will be slower than other central bankers from its major partners.

BoE Governor Andrew Bailey said the central bank would be “careful not to cut interest rates too quickly or too much” in his speech at the Jackson Hole Symposium (JH) on Friday.

The BoE announced its first interest rate cut on August 1, ending two-and-a-half years of tight monetary policy as officials gained confidence that price pressures would return to the bank’s 2% target sustainably.

Financial markets currently expect the BoE to deliver one more rate cut this year. The rationale behind a shallow cycle of BoE policy easing is the improving economic outlook for the United Kingdom (UK).

The economic outlook for the UK economy improved after the S&P Global/CIPS flash PMI showed that activity in the manufacturing and services sectors grew at a faster-than-expected pace in August.

In the Eurozone, the euro (EUR) is underperforming as investors appear confident that the European Central Bank (ECB) will cut interest rates again at its September meeting. Easing price pressures in the common currency region and an uncertain economic outlook have led to ECB rate cut expectations.

For further interest rate guidance, investors await the Eurozone’s harmonized index of consumer prices (HICP) flash data for August, which will be released on Friday.