EUR/GBP extends gains near 0.8720 ahead of German data

• EUR/GBP receives upward support before the releases of economic data from Germany.
• German GDP is expected to decline by 0.3% (QoQ); the yearly index suggests a 0.7% decrease.
• Investors adopt cautious stance ahead of the BoE policy meeting.

EUR/GBP extends gains on the second successive day, trading near 0.8720 during the early European session on Monday. The cross pair receives upward support ahead of the key economic data releases from Germany.

However, the preliminary German Gross Domestic Product (GDP) is anticipated to shrink by 0.3% quarter on quarter, with the yearly index poised for a 0.7% decrease compared to the 0.2% decline in the previous report. Meanwhile, the initial outlook for the Consumer Price Index (MoM) suggests a decline to 0.2% from the previous 0.3%.

Additionally, the Euro experienced declines following the decision of the European Central Bank (ECB) to maintain the deposit rate at 4.0%, attributing the choice to a deteriorating economic outlook for the Eurozone.

ECB President Christine Lagarde is in for a balancing act, steering the central bank through a tricky economic landscape. Navigating between a weakening economy and robust inflationary pressures is no small feat. With the added complexity of monitoring the Middle East crisis, staying data-dependent seems like a wise strategy.

On the other side, the Pound Sterling (GBP) faces challenge as the traders adopt cautious stance ahead of the Bank of England (BoE) policy meeting scheduled on Thursday, with widespread anticipations that the central bank will maintain the current interest rates at a 15-year high of 5.25% over growing fears about recession.

The United Kingdom's economy is feeling the pinch of elevated interest rates, compounding the challenges posed by persistent inflation. Economic data indicates notable contractions in various sectors, with the burden of high inflation adding pressure to household budgets.