The EUR/GBP pair saw a rebound from its nine-month low of 0.8496 recorded earlier in the week, with trading hovering around 0.8520 during Tuesday’s European session. At the 2024 BOJ-IMES Conference, European Central Bank (ECB) Executive Board member Isabel Schnabel suggested that Quantitative Easing (QE) might have weakened the transmission of monetary policy during the recent tightening cycle. Schnabel proposed that targeted longer-term refinancing operations could offer substantial support to bank-based economies with a more restrained impact.
Investors are eagerly awaiting inflation surveys later in the day for insights into the ECB’s monetary policy trajectory. Additionally, market attention is drawn to Wednesday’s release of German Consumer Price Index (CPI) inflation figures, with expectations set for a modest 0.2% month-over-month (MoM) growth in May, compared to the previous 0.5%.
In the United Kingdom (UK), the annual inflation rate eased to 2.3% in April, inching closer to the Bank of England‘s (BoE) 2% target. This moderation has tempered expectations of a rate cut in June among investors, potentially bolstering the Pound Sterling (GBP) and weakening the EUR/GBP cross.
The GBP gains momentum as traders anticipate the BoE’s prolonged maintenance of borrowing costs to counter inflation. Additionally, UK Prime Minister Rishi Sunak’s call for general elections on July 4 has caught attention. Citigroup strategist Jamie Searle noted that the July election in the UK could “further reduce the chance of a near-term BoE cut,” thereby minimizing the risk of electoral interference with the BoE cycle and allowing a continued focus on data-driven policymaking.
