EUR/GBP trades higher around 0.8550 during the early trading hours in the European session on Thursday. The downbeat economic data from the United Kingdom (UK) released on Wednesday, reinforced the pair. As said, the preliminary S&P Global/CIPS Composite PMI (Aug) declined to 47.9 from the previous report of 50.8, weaker than the expectation of 50.3. It is noteworthy, that the index fell below 50 for the first time since January. On the other hand, soft PMI data from the Eurozone and Germany could be capping the gains of the EUR/GBP pair. This comes amid a cautious market sentiment, as investors might seek further indications concerning the inflation outlook within the Eurozone.
Eurozone’s preliminary HCOB Composite PMI for August reported a decline of 47, against the expectation of 48.5 from the previous 48.6. In the meantime, Germany’s Composite PMI reduced to 44.7, lower than the market consensus of 48.3, which was 48.5 in July. Investors had already priced in the lower probability of an interest rate hike in the September meeting by the European Central Bank (ECB), given the moderate GDP and inflation figures released the previous week. However, the EUR/GBP strengthened due to the disappointing UK economic data, which reduced the likelihood of the monetary policy tightening by the Bank of England (BoE). ECB President Christine Lagarde’s speech would be the focal point for Investors on Friday during the Jackson Hole annual symposium, which may provide insights into the financial and economic situations. Market participants will also likely monitor the UK GfK Consumer Confidence and Eurozone’s Gross Domestic Product (GDP) for August, seeking further cues on inflation scenarios in both economies.