EUR/GBP drifts lower below 0.8350 on upbeat UK GDP data

• EUR/GBP softens to around 0.8340 in Thursday's early European session.
• UK GDP rose 0.1% QoQ in Q4 vs. -0.1% expected.
• The German HICP climbed 2.8% YoY in January, as expected. 

The EUR/GBP cross loses momentum to near 0.8340 during the early European session on Thursday. The Pound Sterling (GBP) edges higher after the release of UK growth numbers. The attention will shift to the preliminary reading of the Eurozone Gross Domestic Product (GDP) for the fourth quarter (Q4), which will be published on Friday. 

Data released by the Office for National Statistics (ONS) showed on Thursday that the UK economy expanded 0.1% QoQ in Q4. The reading came in better than the market consensus of a 0.1% decline in the reported period. Meanwhile, the UK GDP grew 1.4% YoY in Q4 versus the 1.1% expected and 0.9% seen in Q3. The GBP trades firm in an immediate reaction to the upbeat UK GDP data.

Bank of England (BoE) Chief Economist Huw Pill said on Thursday that he "urges caution on interest rate cuts" because the long process of wrestling down inflation is not yet complete. Earlier this week, BoE policymaker Catherine Mann said that demand conditions are significantly weaker than before. She had also advocated for a larger interest rate cut in last week's policy meeting, where the BoE unanimously agreed to lower rates by 25 basis points (bps).

On the Euro front, Destatis on Friday showed that the German Harmonized Index of Consumer Prices (HICP) rose 2.8% YoY in January, compared to the previous reading and the expectations of 2.8%. 

The European Central Bank (ECB) has lowered borrowing costs five times since last June and hinted at more policy easing. Traders expect the ECB to deliver three more interest rate cuts this year amid risks of inflation undershooting the central bank's target of 2%. The ECB already reduced its Deposit Facility Rate by 25 bps to 2.75% in the January meeting.