In the early European trading hours on Thursday, the EUR/GBP cross continues its upward trend, hovering around 0.8605. This marks the third consecutive day of gains as traders brace for the Bank of England‘s (BoE) interest rate decision.
Speculation mounts that the BoE may opt for an interest rate cut before the European Central Bank (ECB), a factor contributing to the Pound Sterling‘s (GBP) weakness against the Euro (EUR). The BoE is anticipated to maintain its main interest rate at a 16-year high of 5.25% during its May meeting on Thursday. However, all eyes are on BoE Governor Andrew Bailey’s speech for insights into the timing of potential rate cuts. Bailey’s recent remarks indicating openness to rate cuts in future meetings, citing eased inflationary risks, have fueled expectations of imminent monetary policy adjustments.
Market sentiment suggests that the BoE may move to lower borrowing costs between June and August, as highlighted by Kathleen Brooks, Research Director at XTB Trading Group.
Meanwhile, attention in the Eurozone turns to the ECB Monetary Policy Meeting Accounts scheduled for Friday, expected to provide insights into the economic outlook and interest rate trajectory. ECB policymaker Pierre Wunsch’s remarks on Wednesday hinted at the possibility of rate cuts this year, contingent upon incoming economic data. Wunsch expressed expectations of a 50 basis points (bps) cut by the central bank, though uncertainties persist regarding the timing and extent of such measures.
