EUR/GBP climbs as weak UK data fuels BoE rate cut speculation

• EUR/GBP rises as UK economic data for May misses expectations.
• UK GDP, Industrial and Manufacturing data fall, raising expectations that the Bank of England may be forced to cut rates further.
• The EUR/GBP pair clings to gains as bullish momentum supports higher prices.

The British Pound (GBP) is falling against the Euro (EUR) on Friday, following a series of economic data releases that pointed to a weakening UK economy.

With Gross Domestic Product (GDP), Industrial and Manufacturing production figures missing expectations, a lift in EUR/GBP has pushed prices above the 0.8650 handle at the time of writing.

The monthly GDP figures released on Friday revealed that the UK economy shrank by 0.1% in May, missing forecasts of a 0.1% expansion.

Meanwhile, Industrial and Manufacturing Production figures in May fell sharply by 0.9% and 1.0% respectively, both below expectations. 

With economic momentum faltering, the data reinforces expectations that the Bank of England (BoE) could shift toward a more dovish stance, increasing the likelihood of a rate cut, pressuring the GBP and lifting EUR/GBP.

This fundamental weakness in UK data provided a fresh catalyst for EUR/GBP, with the pair breaking above the 23.6% Fibonacci retracement level of the March-April uptrend at 0.8634. The move reinforces bullish sentiment as the 10-day moving average continues to rise and the Relative Strength Index (RSI) climbs to 66, approaching overbought territory but not yet signaling exhaustion.

On the upside, a sustained close above the 0.8670 psychological barrier could clear the path for a retest of the April high near 0.8738, with further extension possible toward the 0.8750-0.8780 resistance zone.

Continued weak UK data, widening yield spreads, or any dovish shift from the Bank of England would likely add fuel to the rally.

In contrast, failure to hold above 0.8634 could trigger a pullback toward initial support at 0.8622 (10-day moving average), followed by the 38.2% Fibonacci level at 0.8576. A break below that could expose the 50-day moving average near 0.8494 and shift the near-term outlook back to neutral.

EUR/GBP daily chart