The EUR/GBP cross struggles to build on the previous session’s recovery from the 0.8545 level, a one-week low, encountering fresh selling pressure on Thursday. During the early European trading hours, spot prices hover around the 0.8560 mark, with market participants eagerly awaiting the European Central Bank (ECB) meeting for potential guidance before committing to new trading positions.
Market expectations anticipate the ECB to maintain its main refinancing rate unchanged, directing attention towards the release of updated staff projections. Analysts will closely analyze these projections for insights into the timing of potential future interest rate adjustments. With markets increasingly pricing in the likelihood of an initial rate cut in June, driven by a faster-than-expected decline in Eurozone inflation, the euro faces downward pressure, impacting the EUR/GBP cross.
The outcome of the ECB meeting, coupled with remarks from ECB President Christine Lagarde during the subsequent press conference, will significantly influence the short-term outlook for the euro and provide momentum to spot prices. Additionally, the escalating speculation of at least four interest rate cuts by the Bank of England (BoE) in the current year, starting as early as June, is expected to constrain the upside for the British Pound (GBP), thereby limiting potential losses for the EUR/GBP cross.
Technically, the recent rejection near the 100-day Simple Moving Average (SMA) followed by a decline favors bearish sentiment. However, given the prevailing fundamental landscape, traders are advised to await confirmation of sustained selling pressure before positioning for a substantial downside move, potentially breaching the psychological support level at 0.8500 or the year-to-date low reached in February.
