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EUR/GBP remained volatile on Thursday as the two currencies’ central banks raced to reiterate to markets that progress is being made in the fight against inflation and that a rate cut is on the way, but not quite there yet. The Bank of England (BOE) voted 7-2 to keep interest rates steady, taking a step towards a rate cut, while talking points from various European Central Bank (ECB) officials reiterated the message that inflation will eventually return to the ECB’s target level.
All but two of the nine voting members of the Bank of England’s Monetary Policy Committee (MPC) voted to remain on hold at the next meeting. Markets expected the vote to be 8 to 1, with Dr Swati Dhingra widely expected to be the only one to insist on a 25 basis point rate cut. Sir David Ramsden, deputy governor for markets and banking, joined Dr Dhingla in voting for a 25 basis point cut, taking the Bank one step closer to lowering interest rates.
New UK gross domestic product (GDP) data will be released on Friday, which is expected to return to growth after contracting last month. UK GDP is expected to grow at a quarterly rate of 0.4% in the first quarter, compared with -0.3% in the previous quarter.
