During Wednesday’s European session, the EUR/GBP currency pair found stability around the 0.8580 mark as investors digested comments from Bank of England (BoE) Monetary Policy Committee (MPC) Member Catherine Mann. Her remarks pointed towards a cautious stance on interest rates, citing softening labor market conditions and a slowdown in services inflation as key factors influencing her decision to advocate for holding rates steady.
Mann’s statement has sparked optimism among market participants regarding the possibility of a more accommodative monetary policy stance by the BoE. However, she also cautioned against excessive expectations, noting that financial markets might be anticipating an overly aggressive series of rate cuts. She emphasized that the BoE is unlikely to take action before the US Federal Reserve, stating, “I think they’re pricing in too many cuts.”
Meanwhile, the EUR/GBP cross received a modest boost following the release of inflation data for February in the United Kingdom, which fell short of expectations. This development has led to a reassessment of market expectations, with some anticipating the potential for rate cuts by the BoE starting as early as the June meeting.
On the other side of the equation, the Euro faces downward pressure amid speculation of a rate cut by the European Central Bank (ECB) in June. ECB policymakers, including Madis Muller and Yannis Stoumaras, have hinted at the possibility of easing monetary policy in the near future, with Muller suggesting that the ECB is nearing a point where rate cuts may become necessary.
Looking ahead, traders will closely monitor speeches from ECB Chief Economist Philip Lane and ECB Executive Board member Piero Cipollone, along with the release of key economic indicators such as the European Commission’s Business Climate and Consumer Confidence data for March. Additionally, attention will be focused on the release of the Bank of England’s Financial Policy Committee (FPC) Minutes and Statement later in the day, providing further insights into the UK’s economic outlook.
