During the early European trading hours on Monday, the EUR/GBP pair retraced its gains from the previous session, hovering around the 0.8550 mark. The retracement came following remarks by European Central Bank (ECB) Governing Council member Yannis Stournaras, who suggested the possibility of four interest rate cuts in 2024, potentially totaling a reduction of 100 basis points (bps) by year-end. Stournaras’ comments added pressure on the EUR/GBP cross.
Meanwhile, expectations of the Bank of England (BoE) implementing three quarter-point rate reductions throughout 2024 continue to weigh on the GBP. The UK’s weak economic data, indicating a recession in the latter half of 2023, has contributed to tempering this retracement. BoE Governor Andrew Bailey’s recent statement hinting at potential interest rate cuts in upcoming policy meetings has further dampened the Pound Sterling (GBP).
With limited high-impact data anticipated from the United Kingdom (UK) for the week ahead, traders are poised to scrutinize the UK economic landscape, closely monitoring indicators such as Nationwide Housing Prices, S&P Global PMI, and Halifax House Prices data scheduled for release.
ECB policymaker Robert Holzmann underscored the likelihood of interest rate cuts, contingent upon wage and price developments by June. Additionally, market attention will be directed towards the German Consumer Price Index (CPI) set for release on Tuesday, followed by the Eurozone Harmonized Index of Consumer Prices data scheduled for Wednesday.
