EUR/GBP gains traction around 0.8630 following the UK data

• EUR/GBP attracts some buyers and edges higher to 0.8626 after the UK growth data.
• European Central Bank (ECB) anticipates inflation in the Eurozone to remain over 3% next year.
• UK growth number shrank 0.5% MoM in July vs. 0.5% expansion in June, worse-than-expectation.

The EUR/GBP cross gains momentum above the 0.8600 mark during the early European session on Wednesday. The rebound in the Euro is supported by the weaker-than-expected UK growth number, which fuels concern about the aggressive rate hike by the Bank of England (BoE) that impacts the UK economy. The cross currently trades near 0.8626, gaining 0.16% on the day.

Investors' expectations on interest rates from the European Central Bank (ECB) have been divided, with approximately 40% of investors anticipating a rate hike at its meeting on Thursday. Nonetheless, if the unverified ECB news proves accurate, the ECB may announce another rate hike this week. The Euro may strengthen versus the British Pound (GBP), acting as a tailwind for the EUR/GBP cross. According to Reuters, the European Central Bank (ECB) anticipates inflation in the Eurozone to remain over 3% next year, supporting the argument for a tenth straight interest rate hike on Thursday.

On the other hand, the latest data released by the Office for National Statistics (ONS) showed on Wednesday that the UK Gross Domestic Product (GDP) declined 0.5% MoM in July, following a 0.5% expansion in June and worse-than-expectation of 0.2% drop. The Index of services (July) came in at 0.1% 3M/3M vs. 0.1% prior.

Additionally, the UK Industrial Production dropped 0.7% MoM in July from 1.8% growth in June and below the expectation of a 0.6% drop. While Manufacturing Production fell 0.8% MoM in July versus 2.4% in June beating the market consensus of a 1% drop. In response to the data, the British Pound (GBP) lost traction against its rivals.

Moving on, market participants will keep an eye on the Eurozone Industrial Production. On Thursday, the attention will shift to the ECB's monetary policy and the US Retail Sales. The event could provide the EUR/GBP cross with a clear direction.