EUR/GBP steadies as ECB signals caution, markets await Eurozone data

• The Euro steadies against the Pound Sterling amid cautious markets and a thin macroeconomic calendar.
• European Central Bank officials strike a guarded tone, citing downside inflation risks.
• Investors now turn their focus to Eurozone sentiment indicators and upcoming growth data.

EUR/GBP trades without a clear direction on Wednesday, hovering around 0.8690 at the time of writing and virtually unchanged on the day. Trading conditions remain subdued, as a light economic calendar in both the United Kingdom (UK) and the Eurozone encourages investors to remain cautious.

The Euro’s (EUR) performance is primarily shaped by recent comments from European Central Bank (ECB) officials. ECB Governing Council member Martin Kocher says the institution is “in a good place” for now, while warning that further appreciation of the common currency could become problematic if it starts to weigh on inflation projections. He acknowledges that downside risks are significant and stresses the need for policymakers to preserve full flexibility in future monetary policy decisions.

These remarks have helped rein in the Euro’s recent upward momentum. According to data reported by Reuters, Eurozone money markets have increased the chance of an interest rate cut as early as July to around 25%, up from roughly 15% previously. This shift in expectations is limiting the Euro’s upside potential against the Pound Sterling (GBP).

Other ECB officials have echoed this cautious stance. Gediminas Simkus notes that the current policy setting is appropriate and that interest rates are likely to remain unchanged in the near term, while emphasizing that the path ahead will remain highly data-dependent. This communication reinforces the view that the ECB will maintain a wait-and-see approach.

On the UK side, the Pound Sterling finds some underlying support from the perception that the Bank of England (BoE) can afford to proceed cautiously before delivering further rate cuts. A Reuters poll shows that a large majority of economists expect rates to remain on hold at the next meeting, helping to contain moves in EUR/GBP.

In the near term, traders’ attention turns to Eurozone sentiment surveys due later this week, as well as preliminary fourth-quarter Gross Domestic Product (GDP) data and the Unemployment Rate. In the absence of major surprises, EUR/GBP is likely to remain in a consolidation phase, driven by evolving monetary policy expectations on both sides of the Channel.