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During early trading in the European market on Thursday, EUR/GBP expanded its upward trend near 0.8605. The cross traded higher for a third day in a row ahead of the Bank of England (BOE) interest rate decision. Traders are betting that the Bank of England (BOE) may cut interest rates before the European Central Bank (ECB), putting pressure on the pound (GBP) against the euro (EUR).
The Bank of England (BOE) is expected to keep its key interest rate at a 16-year high of 5.25% at its May meeting on Thursday. Investors will get more clues from Bank of England Governor Andrew Bailey’s speech on the timing of a rate cut. Bank of England Governor Bailey said last week that interest rates may be cut at future meetings as inflation risks have eased.
“Markets expect the Bank of England to cut interest rates for the first time between June and August,” said Kathleen Brooks, research director at XTB Trading Group.
In the euro, attention will shift to the accounts of the European Central Bank’s monetary policy meeting on Friday, which may provide some hints on the economic outlook and the trajectory of interest rates. European Central Bank policymaker Pierre Wunsch said on Wednesday that while the outlook remained murky, he believed a first interest rate cut this year was possible. He further said that the central bank is expected to cut interest rates by 50 basis points, but this will depend on upcoming economic data.
