EUR/GBP softens to near 0.8650 amid no progress on Russia-Ukraine peace deal

• EUR/GBP weakens to near 0.8660 in Monday's early European session. 
• The upbeat flash UK PMI data support the Pound Sterling. 
• ECB's Lagarde said the Europe labor market is in surprisingly good condition. 

The EUR/GBP cross loses ground to around 0.8660 during the early European session on Monday. A slew of better-than-expected UK economic data provides some support to the Pound Sterling (GBP) against the Euro (EUR). Traders will take more cues from the IFO Survey from Germany for fresh impetus, which will be released later on Monday. 

The upbeat preliminary UK S&P Global Purchasing Managers' Index (PMI) data for August and hot UK July inflation data diminish the odds of the Bank of England (BoE) rate cuts this year. This, in turn, boosts the GBP and acts as a headwind for the cross. Data published this week showed that the UK Composite PMI increased at a faster-than-expected rate to 53.0 owing to strong growth in the services sector. 

Meanwhile, the UK Consumer Price Index (CPI) data for July revealed that both headline and core CPI rose at a faster-than-expected rate of 3.8% year on year. The UK central bank cut the interest rates from 4.25% to 4.0% 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.  

On the Euro front, the lack of progress in Russia-Ukraine negotiations weighs on the shared currency. Russia's Foreign Minister Sergei Lavrov said over the weekend that there was no agenda for such a summit. "Putin is ready to meet with Zelenskyy when the agenda would be ready for a summit. And this agenda is not ready at all," he said. Persistent conflict between Russia and Ukraine implies higher energy costs and increases geopolitical uncertainty in the Eurozone, which generally exerts some selling pressure on the EUR. 

Nonetheless, rising bets that the European Central Bank (ECB) will keep interest rates on hold next month might help limit the EUR's losses. ECB President Christine Lagarde said on Saturday that Europe's labor market has held up far better than expected despite soaring inflation and steep interest-rate hikes in recent years.