Euro gains against British Pound despite stronger UK growth data

The Euro (EUR) gained against the British Pound (GBP) on Thursday despite stronger-than-expected UK GDP growth data that would typically bolster the GBP. The EUR/GBP pair traded around 0.8549, ending a three-day decline. The UK economy expanded by 0.3% in June, surpassing market expectations of no growth. While GDP grew by 0.4% in the second quarter, it was lower than the 0.6% growth in the first quarter.

Year-over-year, GDP rose by 1.2%, exceeding forecasts by 0.1%. Standard Chartered analysts suggest that UK GDP growth in Q2, which exceeded the Bank of England’s July projection, is unlikely to influence policy decisions. They believe inflation data and labor-market data are more critical factors for the Bank of England's decision-making.

The Bank of England is expected to maintain its current rate stance for the year as financial conditions have tightened since the start of the Middle East conflict. Meanwhile, the European Central Bank (ECB) is anticipated to raise its deposit rate by 25 basis points to 2.50% in September. Most ECB policymakers believe that the tightening in financial conditions due to rising energy prices provides adequate protection against inflation risks stemming from higher energy costs. The Euro showed strength against major currencies, notably gaining against the New Zealand Dollar.