EUR/GBP falls to near 0.8550 as BoE could delay rate cuts

Source Fxstreet
Apr 25, 2024 08:39
  • EUR/GBP extends losing streak on growing expectations of BoE delaying rate cuts.
  • The gains in the UK 10-year yield enhanced the hawkish expectations for the BoE’s stance on monetary policy.
  • ECB's Schnabel noted that the last phase of reaching Eurozone inflation of 2% could be challenging.

The EUR/GBP cross continues to lose ground for the third consecutive session, trading around 0.8570 during the European session on Thursday. The Pound Sterling (GBP) is finding support as the markets anticipate that the Bank of England (BoE) will likely wait until the next quarter to lower borrowing costs, according to median forecasts in a Reuters poll.

Reuters reported on Tuesday that Bank of England Chief Economist Huw Pill said that interest rate cuts are still some way off, even though the passage of time and an absence of negative news on inflation have brought them closer.

The 10-year yield on United Kingdom (UK) government Gilts hovers around 4.31%, nearing five-month highs. The hawkish expectations for the BoE have been amplified by a fresh increase in bond supply by the UK government. Lingering concerns about sticky inflation, coupled with a surprisingly robust domestic Purchasing Managers Index (PMI), have pushed back expectations of the first BoE rate cut.

In Europe, European Central Bank (ECB) policymakers are adhering to plans to lower interest rates this year. ECB President Christine Lagarde stated on Monday that the central bank might decrease its deposit rate from a record-high 4% in June but has kept its options open for further measures, per Reuters report. The dovish stance of the ECB is exerting some selling pressure on the Euro (EUR) and creating headwinds for the EUR/GBP cross.

Furthermore, ECB board member Isabel Schnabel said at a conference on Thursday that the final stage of achieving Eurozone inflation of 2% may encounter obstacles, with erosion in productivity and high service costs posing clear risks. Schnabel highlighted a consensus emerging that the journey to achieving the inflation target could be quite challenging, with services inflation being a significant concern.

On the data front, the German GfK Consumer Confidence Survey for May recorded a reading of -24.2, better than the expected -25.9 and the prior figure of -27.3. German consumer sentiment is anticipated to improve in the coming months, largely supported by better income expectations. UK Consumer Confidence data is scheduled for release on Friday, with expectations of a slight improvement in April.

EUR/GBP

Overview
Today last price 0.8571
Today Daily Change -0.0013
Today Daily Change % -0.15
Today daily open 0.8584
 
Trends
Daily SMA20 0.8568
Daily SMA50 0.8559
Daily SMA100 0.8575
Daily SMA200 0.8607
 
Levels
Previous Daily High 0.86
Previous Daily Low 0.8584
Previous Weekly High 0.8616
Previous Weekly Low 0.8521
Previous Monthly High 0.8602
Previous Monthly Low 0.8504
Daily Fibonacci 38.2% 0.859
Daily Fibonacci 61.8% 0.8594
Daily Pivot Point S1 0.8578
Daily Pivot Point S2 0.8573
Daily Pivot Point S3 0.8562
Daily Pivot Point R1 0.8595
Daily Pivot Point R2 0.8606
Daily Pivot Point R3 0.8612

 

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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