EUR/GBP flat lines near 0.8650 as traders await Eurozone/UK PMI data

• EUR/GBP trades flat around 0.8655 in Thursday's early European session. 
• Hotter-than-expected UK July inflation data diminishes the chance of a further rate cut by the BoE this year.
• ECB's Lagarde said she saw slower growth with trade uncertainty lingering. 

The EUR/GBP cross trades on a flat note around 0.8655 during the early European session on Thursday. Traders prefer to wait on the sidelines ahead of the preliminary reading of the HCOB Purchasing Managers Index (PMI) for August from the Eurozone and Germany, which are due later on Thursday. Also, flash UK S&P Global PMI data will be published. 

UK inflation rose again in July to a higher-than-expected 3.8% amid higher food prices and travel costs, prompting the expectation that the Bank of England (BoE) will delay further interest rate cuts. This, in turn, could underpin the Pound Sterling (GBP) and create a headwind for the cross. 

The BoE cut the interest rates from 4.25% to 4% earlier this month as the UK central bank resumed what it describes as a "gradual and careful" approach to monetary easing. A quarter-point cut is not fully priced in until March 2026. Earlier this month, the next rate reduction was viewed as highly likely before the end of 2025, per Reuters. 

On the Euro front, the European Central Bank (ECB) President Christine Lagarde said on Thursday that the Eurozone economy is likely to see slower growth this quarter. Lagarde added that recent trade deals have alleviated but not eliminated due to uncertainty from the unpredictable policy environment.

ECB policymakers are anticipated to leave the deposit rate at 2.0% when they meet in September after their summer break, extending a pause that began last month following a yearlong campaign of cuts. The HCOB PMI reports released on Thursday could offer some hints about the interest rate path in the Eurozone. In case of a stronger-than-expected outcome, this could support the shared currency in the near term.