• EUR/GBP falls back from the day’s highs after Eurozone GDP growth for Q2 is revised down. 
• The data increases the chances the ECB will cut interest rates in September, weighing on the Euro. 
• EUR/GBP is capped because of Sterling strength due to expectations the BoE will cut rates more slowly amid stronger growth. 

EUR/GBP gives back early gains on Friday as traders sell the Euro (EUR) following the release of Eurozone Gross Domestic Product (GDP) data which showed a downward revision in the second quarter from the initial estimate. This brings the pair back down into the week’s range in the early 0.8420-30s. 

Eurozone GDP grew at a slower 0.2% quarterly pace in Q2 compared to the 0.3% of the previous estimate, and below the 0.3% of Q1. The downward revision increases the chances the European Central Bank (ECB) will cut interest rates at its September meeting. This, in turn, weighs on EUR/GBP since lower interest rates are negative for the Euro because they reduce foreign capital inflows. 

The slowdown in growth also plays into fears that too-high interest rates are stifling growth, reinforcing comments from ECB Executive Board member Piero Cipollone, who said, in an interview with a French newspaper this week that "there is a real risk that (the ECB) stance could become too restrictive." 

EUR/GBP is further capped by the strength of the Pound Sterling (GBP) which sees gains from investors’ view that the Bank of England (BoE) will take a shallower easing path – cutting interest rates at a slower pace – than most other central banks, including the ECB. The BoE is only expected to make a 0.25% cut before the end of 2024 as the recent run of strong data indicates the economy continues growing and services sector inflation remains high.