EUR/GBP sets for third consecutive weekly fall on firm ECB rate cut bets

• EUR/GBP remains on the backfoot amid sheer weakness in the Euro.
• Sof Eurozone inflation prompts ECB rate cut bets.
• The BoE is expected to deliver one more interest rate cut this year.

The EUR/GBP pair is all set to conclude the week in red for the third straight week. The asset remains on the backfoot as the Euro (EUR) weakens, with financial market participants seeming to be confident that the European Central Bank (ECB) will cut interest rates again in September after announcing the first in the June meeting.

The ECB is almost certain to reduce its key borrowing rates next month as price pressures in the Eurozone economy have declined expectedly in August and its economic outlook is uncertain, with growing fears that the German economy could enter a recession.

Flash Eurozone Harmonized Index of Consumer Prices (HICP) report for August, released in Friday's European trading hours, reported that the headline and core inflation- which excludes volatile items like energy, food, alcohol and tobacco- decelerated expectedly to 2.2% and 2.8%, respectively. Month-on-month core HICP rose by 0.3% after contracting in July.

Market speculation for ECB rate cuts in September was already firm as German HICP returned to the bank's target of 2% in August, according to the data released on Thursday.

"Fading inflationary pressure combined with fading growth momentum offers an almost perfect macro backdrop for another rate cut," said Carsten Brzeski, global head of macro at ING, in a note on Thursday.

Meanwhile, the Pound Sterling (GBP) exhibits sheer strength against its major peers on expectations that the Bank of England's (BoE) policy-easing cycle would be slower. The BoE is expected to cut interest rates one more time this year. The central bank pivoted to policy normalization in its recent policy meeting on August 1.