EUR/GBP resurfaces from 0.8600 ahead of German GDP

• EUR/GBP has seen fresh demand around 0.8600 as the impact of less-hawkish ECB policy guidance eases.
• UK PM Rishi Sunak is exploring tax rise and spending cuts of up to GBP 50 billion.
• Investors will shift their focus toward the BOE policy decision scheduled for next week.

The EUR/GBP pair has witnessed fresh demand from 0.8610 in the Tokyo session. The asset delivered a north-side break of the consolidation formed in a narrow range of 0.8610-0.8620 ahead of the German Gross Domestic Product (GDP) data.

The risk profile has sensed a recovery as S&P500 futures have trimmed their gains. Also, the US dollar index (DXY) has witnessed a correction to near 110.35.

On Thursday, the shared currency bulls witnessed an extreme sell-off after the announcement of the monetary policy by the European Central Bank (ECB). ECB President Christine Lagarde announced a consecutive 75 basis point (bps) rate hike and pushed the interest rates to 1.5%, the highest since 2009 to combat the historic surge in inflation and ensure a timely return of the same to 2%.

What weakened the euro bulls is the less-hawkish tone on policy guidance. However, analysts at Commerzbank, point out Christine Lagarde sounded dovish at the press conference but they still see that another big rate hike for the December meeting remains on the table.

Going forward, investors will focus on the German Domestic Product (GDP) data. As per the consensus, the annual GDP growth rate for the third quarter will land at 0.8%, lower than the prior release of 1.7%. On a quarterly basis, the GDP data will display a contraction of 0.2%.

On the UK front, novel UK Prime Minister Rishi Sunak has shifted its entire focus on trimming the pile of debt to bring financial stability. Reports from Financial Times claim that Sunak is exploring tax rises and spending cuts of up to GBP 50 billion, which is in line with the agenda of the bank of England (BOE). Next week, investors will shift their entire focus toward the monetary policy of the BOE. The impact of the monetary policy decision will be extremely higher as it will be the first interest rate decision post-Sunak’s appointment as UK PM.