Euro gives up 3-month high against pound

The euro fell on Wednesday against a basket of major and minor currencies, giving up a three-month high against the pound, due to a noticeable correction and profit-taking activity.

The outlook remains bullish for the EUR/GBP pair, given the weak chances of the European Central Bank cutting interest rates in September, versus the stronger chances of the Bank of England cutting interest rates for the second consecutive meeting next month.

Price overview• The exchange rate of the euro against the pound sterling today: The euro fell against the pound sterling by 0.3% to (0.8582), from the opening price of today’s trading at (0.8609), and recorded a high of (0.8615).

•The euro rose 0.5% against the pound yesterday, its fourth consecutive daily gain, and the previous day it recorded its highest level in three months at 0.8620 pounds.

These gains were attributed to the acceleration of large short positions covering the EUR/GBP pair.

European Interest After the acceleration of prices in Europe contrary to expectations in July, the pricing of the possibility of the European Central Bank cutting interest rates at the next September meeting has decreased to less than 50%, awaiting more data that clarifies the development of growth and inflation levels in the Eurozone during the coming period.

UK interest rateThe Bank of England threw itself into the dovish spotlight by easing monetary policy at its August 1 meeting, cutting UK interest rates by about 25 basis points for the first time since 2020.

Experts expect a deeper monetary easing cycle from the Bank of England, which greatly increases the chances of a 25 basis point cut in British interest rates during the September meeting, for the second meeting in a row.

Interest rate gap: The current interest rate gap between the UK and Europe, at 75 basis points in favour of the UK interest rate, is expected to narrow to 50 basis points in September in light of the current probabilities regarding European and British interest rates.

Accordingly, any evidence of a narrowing of this gap in the coming period will support the continued rise in the exchange rate of the euro against the pound sterling, and vice versa.