EUR/GBP extends the rally above 0.8500 ahead of ZEW Economic Sentiment Surveys

• EUR/GBP remains firm around 0.8520 in Tuesday’s early European session.

• Traders expect the ECB to pause its easing cycle this year. 

• BoE rate cut bets continue to weigh on the Pound Sterling. 

The EUR/GBP cross extends its upside to near 0.8520 during the early European trading hours on Tuesday. The Euro (EUR) strengthens against the Pound Sterling (GBP) as traders expect the European Central Bank (ECB) to pause its easing cycle to assess the impact of new US tariffs. Later on Tuesday, the ZEW Survey from Germany and the Eurozone will be published. 

The hawkish tone from the ECB policymakers and rising expectation that the ECB will pause its easing cycle underpin the shared currency. ECB President Christine Lagarde said that rate reductions are coming to an end as the central bank is now “in a good position” to deal with prevailing uncertainties. 

Meanwhile, ECB Executive Board member Isabel Schnabel stated last week that the central bank’s interest rate cutting campaign may soon be over, with inflation and the economy both on track. ECB Governing Council member Gediminas Simkus called for a pause in rate cuts due to “very big uncertainty” over US tariff policy. 

The Pound Sterling remains under selling pressure as traders raise their bets on interest rate reductions from the Bank of England (BoE) after a slew of weaker-than-expected UK economic data. The UK central bank is expected to cut the policy by 25 basis points (bps) in the third quarter and the fourth quarter, bringing down the bank rate to 3.75%, according to a large majority of economists polled by Reuters.