EUR/GBP weakens below 0.8550 ahead of speeches by BoE's Bailey, ECB's Lagarde

• EUR/GBP softens to around 0.8545 in Tuesday's early Asian session. 
• UK business activity expanded modestly in June; services sector grew the fastest in three months. 
• Investors will closely watch the speeches from BoE's Bailey and ECB's Lagarde later on Tuesday. 

The EUR/GBP cross extends the decline to near 0.8545 during the early European session on Tuesday. The Pound Sterling (GBP) strengthens against the Euro (EUR) due to the stronger-than-expected UK June flash S&P Global Purchasing Managers' Index (PMI) data. Investors await the speeches from the Bank of England (BoE) Governor Andrew Bailey and the European Central Bank (ECB) President Christine Lagarde later on Tuesday.

The S&P Global UK Composite PMI rose to 50.7 in June from 50.3 in May, above the consensus of 50.5. Meanwhile, the services sector, which dominates the UK economy, registered its fastest growth in three months and outperformed its German and French counterparts in June. This, in turn, lifts the Pound Sterling and acts as a headwind for the cross.

On the Euro front, ECB policymakers have become concerned over the economic outlook due to the tariff policy announced by US President Donald Trump and the escalating tensions in the Middle East. ECB policymaker Francois Villeroy de Galhau said on Tuesday that further rate cuts are still possible despite present conditions.

ECB President Christine Lagarde on Monday highlighted inflation expectations as the key gauge the central bank will monitor to determine whether supply shocks from trade or geopolitical tensions will become persistent. Traders will take more cues from Lagarde again later on Tuesday. Any dovish comments from ECB policymakers could drag the shared currency lower in the near term.