- EUR/GBP edges lower to near 0.8410 ahead of the monetary policy announcement by the ECB.
- The ECB is almost certain to lower interest rates by 25 bps.
- The BoE is unlikely to reduce its key borrowing rates in the policy meeting this month.
The EUR/GBP pair trades slightly lower around 0.8410 during European trading hours on Thursday. The pair faces moderate selling pressure ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 12:15 GMT.
The ECB is all set to reduce its key borrowing rates by 25 basis points (bps) for the seventh consecutive time. This will be the eighth interest rate cut by the ECB since June last year, when it started the monetary expansion cycle.
The return of Eurozone inflation to the ECB’s target of 2% and growing concerns over the trading bloc’s economic outlook in the wake of tariffs announced by United States (US) President Donald Trump have increased investors’ confidence that the central bank will reduce interest rates.
Investors would look for cues about whether the ECB will continue lowering its key borrowing rates in the second half of the year through the monetary policy statement and President Christine Lagarde’s press conference after the interest rate decision.
In late May, ECB policymaker and Governor of the Bank of Greece Yannis Stournaras indicated that he is comfortable with traders’ dovish bets for the policy meeting in June, but anticipates a pause after that. “I expect one more interest rate cut in June and then a pause,” Stournaras said, Greek News media reported.
On the economic front, German Factory Orders data for April has come in better than projected. Fresh Orders in the manufacturing sector rose moderately by 0.6% on month, compared to a 3.4% increase seen in March, revised lower from 3.6%. However, economists anticipated the data to have declined by 1%.
Meanwhile, the Pound Sterling (GBP) is being driven by market expectations for the Bank of England’s (BoE) monetary policy announcement on June 19 in a light economic calendar week. The BoE is less likely to cut interest rates again due to a significant increase in inflation in April. However, there will be May United Kingdom (UK) Consumer Price Index (CPI) data a day before the BoE’s interest rate decision.