EUR/GBP appreciates to near 0.8550, upside seems limited due to dovish ECB's tone

• EUR/GBP may lose ground again as the Euro struggles following dovish comments from the ECB officials.

• ECB’s Francois Villeroy de Galhau noted that the central bank may cut interest rates despite the volatile Oil market.

• BoE Governor Andrew Bailey said that the impact of trade tariffs on inflation is more uncertain.

EUR/GBP edges higher after registering losses in the previous session, trading around 0.8530 during the Asian hours on Wednesday. However, the currency cross faced challenges as the Euro (EUR) lost ground following the dovish remarks from the European Central Bank’s (ECB) officials.

ECB policymaker Francois Villeroy de Galhau told the Financial Times on Tuesday that the central bank could still cut interest rates despite the volatility seen in the Oil market. Meanwhile, ECB chief economist Philip Lane said that "Our monetary policy will have to take into account not only the most likely path (the baseline) but also the risks to activity and inflation," per Reuters.

The Bank of England (BoE) Governor, Andrew Bailey, said during testimony before the Lords Economic Affairs Committee on Tuesday that the impact of trade tariffs on inflation is more ambiguous than the impact on economic growth. Bailey also said, "I think we are starting to see the labor market softening." "Wage settlements are likely to come off," per Reuters.

Meanwhile, BoE Deputy Governor Dave Ramsden noted that if evidence becomes stronger that inflation will undershoot the target, they can speed up rate cuts. Ramsden added that the United Kingdom (UK) has a challenging fiscal environment, although he is less concerned than other Monetary Policy Committee members that disinflation will stall.