EUR/GBP remains below 0.8450 after Eurozone HCOB PMI data

• EUR/GBP pars intraday gains after downbeat HCOB PMI data from Eurozone and Germany.
• Eurozone services PMI fell to 52.9 in August from 53.3 the previous month.
• Sterling could appreciate this as the BoE is expected to keep rates low in September.

EUR/GBP pared intraday gains following the release of HCOB Purchasing Managers Index (PMI) data from the Eurozone and Germany, trading around 0.8430 during the European session on Wednesday. The Eurozone services PMI fell to 52.9 in August from 53.3 the previous month. Meanwhile, the composite PMI fell to 51.0, missing expectations and falling below the previous reading of 51.2, which was expected to remain unchanged.

In Germany, the HCOB Services PMI fell to 51.2 in August, slightly below market expectations for no change from the previous reading of 51.4. Meanwhile, the composite PMI also fell to 48.4, slightly below the anticipated and previous reading of 48.5.

However, upside potential for the EUR/GBP cross may be limited as the euro may face challenges amid strong speculation that the European Central Bank (ECB) will cut interest rates in September. This would mark the ECB’s second interest rate cut since it began moving toward policy normalization in June. Policymakers remain confident that inflation will gradually return to the bank’s 2% target by 2025.

The EUR/GBP cross could struggle as traders do not anticipate any rate cut by the Bank of England (BoE) at its September meeting. However, traders expect a 25 basis point (bps) rate cut in the November meeting.

Growing concerns about the global economy intensified after weak PMI data from the world’s two biggest economies. Traders will be closely watching United Kingdom (UK) PMI data later in the day.