The EUR/GBP pair holds steady near 0.8650 during Wednesday’s early European trading session, supported by optimism surrounding potential US-Russia talks. However, the Euro’s momentum remains capped by weak sentiment data from the Eurozone, with investors eyeing upcoming UK GDP figures for fresh direction.
Despite a weaker-than-expected ZEW Economic Sentiment report for August, the Euro sees modest strength against the Pound. The ZEW Economic Sentiment in the Eurozone plunged to 25.1, a sharp drop from July’s 36.1, while Germany’s reading also fell to 34.7 from 52.7 previously. These figures suggest waning optimism in the region’s economic outlook, potentially limiting the Euro’s upside in the short term.
In contrast, sentiment around the British Pound remains mixed. The UK’s labor market shows signs of cooling, but wage growth continues to be strong, which has led traders to scale back expectations of a near-term Bank of England (BoE) rate cut. Market pricing now suggests that the BoE may not reduce rates until February 2026, reinforcing a more cautious outlook for the GBP.
The market’s focus shifts to Thursday’s preliminary reading of the UK’s GDP for Q2, with investors hoping for signs of resilience in the UK economy despite recent labor market weaknesses. Positive UK economic data could support the Pound against the Euro in the coming sessions.
Meanwhile, optimism about US President Trump and Russian President Putin’s planned talks on Friday to discuss ending the war in Ukraine adds some underlying support to the Euro. Trump’s deadline for Russia to agree to a ceasefire or face further US sanctions also underpins sentiment, although the outcome of these discussions remains uncertain.
As investors await fresh economic data, the EUR/GBP pair is expected to remain confined to a range, with GBP strength or weakness largely dependent on the UK GDP data and broader market sentiment toward central bank actions.
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