In the early European session on Monday, the EUR/GBP cross manages to maintain positive territory, trading close to 0.8305. The dovish undertones of the Bank of England’s (BoE) recent decisions are weighing on the Pound Sterling (GBP), giving the EUR/GBP pair a boost.
Following last week’s policy announcement, traders are factoring in a 53 basis points (bps) cut in UK interest rates for 2025. The BoE opted for a split-vote decision to keep rates unchanged at 4.75%, which was seen as a dovish hold. BoE policymakers pointed to external threats such as geopolitical tensions and potential tariff impositions by President-elect Donald Trump as reasons for their caution. Governor Andrew Bailey noted, “With the heightened uncertainty in the economy, we can’t commit to when or by how much we will cut rates in the coming year.”
Across the eurozone, the European Central Bank (ECB) President Christine Lagarde told the Financial Times on Monday that the region was “very close” to achieving its medium-term inflation target. She also said that if inflation continued to decline towards 2%, further rate cuts would be on the table since aggressive growth-curbing measures were no longer required.
ECB policymakers are increasingly concerned about the rising economic risks, driven by weak demand and the looming threat of Trump’s tariffs. The ECB’s first rate-setting meeting of 2025 is scheduled for January 30. Despite this, investors currently anticipate a relatively more aggressive rate-easing cycle from the ECB next year, which could potentially limit the euro’s strength against the pound.
Related topics:
Gold Gains as Dollar and Treasury Yields Dip Ahead of Fed Decision
Chinese Aluminum Production Soars to New Heights
Crude Oil’s Quest for a Weekly Close Above $70.00 Amid Uncertainties
