EUR/GBP Gains as Euro Strengthens and Pound Awaits BoE Signals
The EUR/GBP exchange rate moved higher on Tuesday, trading close to 0.8650 in early European hours. The euro gained strength after the European Central Bank (ECB) signalled that no more interest rate cuts are expected soon. ECB policymakers said inflation in the Eurozone has reached the 2% target and is now “in a good place.” This reduced market expectations of further policy easing.
Earlier this summer, ECB President Christine Lagarde also noted that the bank is comfortable holding the main rate at 2%. After several cuts in recent months, the pause in policy has added support to the Euro vs Pound outlook.
Meanwhile, the British pound (GBP) is supported by positive UK data. The August S&P Global PMI report showed stronger activity, and July’s inflation data stayed high. These factors make it less likely that the Bank of England (BoE) will cut rates again this year. Recently, the BoE lowered its rate from 4.25% to 4.0% but signaled a very cautious approach. Markets now expect the next possible cut only in March 2026.
This mix of ECB caution and BoE slow easing has kept EUR/GBP forecast in focus. Traders are closely watching economic reports and upcoming BoE speeches for more direction in the forex market.
Impact:
EUR/GBP might stay firm if the euro remains supported by ECB policy. The pound could gain from strong UK data, but market volatility is expected.