EUR/GBP softens to near 0.8600 on upbeat UK GDP data

• EUR/GBP weakens to near 0.8615 in Thursday's early European session.
• UK preliminary GDP grew 0.3% QoQ in Q2 2025, stronger than expected. 
• A higher-for-longer view on ECB rates might cap the EUR's downside. 

The EUR/GBP cross loses ground to around 0.8615 during the early European session on Thursday. The Pound Sterling (GBP) strengthens against the Euro (EUR) after the release of UK Gross Domestic Product (GDP) data. The attention will shift to the preliminary reading of the GDP report for the second quarter (Q2) from the Eurozone, which is due later on Thursday.

Data released by the Office for National Statistics (ONS) on Thursday showed that the UK economy grew 0.3% QoQ in the second quarter of 2025, compared to a 0.7% growth in the first quarter. This figure came in better than the estimation of a 0.1% increase in the reported period.  

Meanwhile, the UK GDP expanded 1.2% YoY in Q2 versus 1.3% prior. This reading was above the market consensus of 1.0%. The monthly UK GDP arrived at 0.4% in June, following a 0.1% decline in May, stronger than the 0.1% expected. The GBP attracts some buyers in an immediate reaction to the upbeat UK GDP data. 

On the Euro front, investors are increasingly pricing in a "higher for longer" interest rate environment from the European Central Bank (ECB), which could help limit the shared currency's losses. Forward contracts on the ECB's official overnight benchmark interest rate, the euro short-term rate (ESTR), imply around a 60% odds of a 25 basis points (bps) rate reduction by March and a deposit rate of 1.92% in December 2026.