During the early hours of European trading on Friday, the EUR/GBP pair maintained a positive stance above the mid-0.8500s, currently trading near 0.8560, exhibiting a marginal 0.01% decline for the day. Investor focus centers on the upcoming release of the Eurozone Harmonized Index of Consumer Prices (HICP) for potential market direction.
Anticipation surrounds the European Central Bank‘s (ECB) expected progression in its policy normalization journey. ECB President Christine Lagarde is poised to dismiss the possibility of rate cuts at the March meeting, although financial markets are speculating on the likelihood of the first rate cuts materializing in June. Market sentiment shifted in February, with policy easing expectations being recalibrated from an initial projection of around 150 basis points (bps) in rate cuts to 87 bps. Analysts now anticipate the first rate cut in June, amounting to 25 bps, with a total projection of 75 bps for the year.
The Bank of England (BoE) Deputy Governor, Dave Ramsden, expressed the need to observe the duration of elevated inflation before contemplating any adjustments to the monetary policy stance. BoE policymakers have pushed back against premature expectations of interest rate cuts, contributing to the strengthening of the Pound Sterling (GBP) and acting as a mitigating factor for the downside of the EUR/GBP cross.
In the immediate future, market participants will closely monitor the release of the Eurozone Harmonized Index of Consumer Prices (HICP) scheduled for Friday, alongside the HCOB Manufacturing PMI figures from Italy, France, and Germany. Furthermore, BoE’s Huw Pill is scheduled to address later in the day. Attention will subsequently shift to the ECB interest rate decision in the following week, potentially instigating market volatility and presenting trading opportunities around the EUR/GBP cross.
