EUR/GBP Sees Modest Gains, Focus on Eurozone HICP Data

In the early European session on Friday, the EUR/GBP pair is showing slight gains, hovering around 0.8560. Investors eagerly await the release of the Eurozone Harmonized Index of Consumer Prices (HICP) for potential market movement. The pair is trading near the mid-0.8500s, experiencing a minimal 0.01% decrease for the day.

Market sentiment is heavily influenced by expectations surrounding the European Central Bank (ECB) and the Bank of England (BoE). While ECB President Christine Lagarde is not expected to announce rate cuts at the upcoming March meeting, investors are eyeing the potential for rate cuts in the June meeting. Forecasts suggest a potential 25 basis points (bps) rate cut in June, with a total of 75 bps anticipated for the year, marking a shift in policy normalization.

Conversely, BoE Deputy Governor Dave Ramsden expressed a cautious approach, indicating a need to assess the duration of elevated inflation before considering any changes to monetary policy. This stance by BoE policymakers has bolstered the Pound Sterling (GBP) and limited downside pressure on the EUR/GBP pair.

Moving forward, market participants will closely monitor the release of Eurozone HICP data, as well as the HCOB Manufacturing PMI reports from critical economies such as Italy, France, and Germany. Additionally, attention will be on remarks from the BoE’s Huw Pill later in the day. As anticipation builds for the ECB interest rate decision next week, heightened volatility is expected in the market, potentially offering trading opportunities for traders focused on the EUR/GBP pair.

EUR/GBP