EUR/GBP slips near 0.8350 despite weaker UK GDP figures

• EUR/GBP depreciates on rising odds for ECB interest rate cut in October.
• UK GDP rose 0.5% QoQ in Q2, slightly below the expected and previous growth of 0.6%.
• Sterling is supported by expectations that the BoE is likely to take a slower approach to rate cuts.

EUR/GBP is retracing recent gains from the previous session, trading around 0.8340 during Asian hours on Monday. The currency cross is hot after the release of second quarter Gross Domestic Product (GDP) data from the United Kingdom (UK).

UK Gross Domestic Product (GDP) rose 0.5% from the second quarter, slightly below expectations and the previous increase of 0.6%. On an annual basis, GDP grew by 0.7%, also below the forecast and previous growth rate of 0.9%.

The EUR/GBP cross received downward pressure on the increasing chances of the European Central Bank (ECB) implementing another interest rate cut in October. Traders are likely to watch a number of economic releases from Germany scheduled for release later in the day, including preliminary consumer price index (CPI) data for September.

In addition, lower-than-expected inflation in France and Spain strengthened the likelihood of the third cut in the ECB’s policy easing cycle, which began in June. The ECB resumed cutting rates in September after holding them steady in July.

Inflation in France rose 1.5% year-on-year in September, significantly below the 1.9% estimate and down from the previous release of 2.2%. On a monthly basis, price pressures deflated at a sharp 1.2% rate, beating expectations for a 0.8% decline. In Spain, the annual harmonized index of consumer prices (IACP) rose 1.7% in September, below the forecast level of 1.9% and down from 2.4% in August. On a month-on-month basis, the HICP fell by 0.1%, against expectations of no change.