The EUR/GBP cross is currently struggling to find a clear direction amidst uncertainty surrounding the upcoming ECB policy decision on Thursday. The ECB is expected to lower interest rates for the third time in this easing cycle due to concerns over sluggish growth and inflation in the Eurozone. This has been putting pressure on the Euro and acting as a headwind for the EUR/GBP cross. On the other hand, comments from the Bank of England Governor hinting at a more aggressive rate-cutting stance if inflation continues to improve have fueled speculation of a faster rate-cutting cycle, which has been weighing on the British Pound and offering some support to the EUR/GBP cross.
The lack of any major economic releases from the Eurozone or the UK has resulted in the EUR/GBP cross trading in a subdued range. Traders are cautious and awaiting a clear signal before taking a firm near-term position. The mixed fundamental backdrop suggests that the cross may continue its sideways movement until more clarity is provided by the central banks. The key focus remains on the ECB policy decision on Thursday, which will likely dictate the near-term direction of the EUR/GBP cross.
One of the key interest rates to watch is the ECB’s rate on the deposit facility, which is the rate at which banks earn interest when depositing funds with the ECB. This rate is expected to be announced during the upcoming ECB meeting on Thursday. Traders will closely monitor any changes in this rate as it can impact the overall market sentiment towards the Euro and the GBP. Any unexpected decisions by the ECB could lead to increased volatility in the currency markets, especially for the EUR/GBP cross.
Overall, the EUR/GBP cross remains range-bound and lacks a clear direction as traders await the ECB policy decision on Thursday. The Eurozone’s easing policy stance and concerns over growth and inflation continue to weigh on the Euro, while speculations of a more aggressive rate-cutting cycle by the BoE have been pressuring the GBP. Until there is more clarity from the central banks, the EUR/GBP cross is likely to continue its sideways movement. Traders should remain cautious and wait for a sustained move in either direction before positioning for a firm near-term trajectory.
