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During early European trading on Thursday, EUR/GBP was trading sideways around 0.8355. However, a less dovish stance from the Bank of England (BOE) may provide some support for Sterling (GBP). Traders will get more clues from speeches by European Central Bank (ECB) policymakers later in the day, including ECB Presidents Christien Lagarde, Frank Elderson and Lecture by Luis de Guindos.
The Bank of England’s cautious stance may support GBP/EUR. Bank of England policymaker Megan Greene said on Wednesday: “I think the risks to economic activity are to the upside, which may point to a higher long-term neutral interest rate, other things being equal, our policy stance is not Not as restrictive as we thought, given the risk, I think a gradual approach to removing restrictions is appropriate.”
On the other hand, the lackluster IFO report released by Germany earlier this week heightened fears of a recession in Germany, triggering expectations of additional interest rate cuts and potentially limiting the upside of the euro (EUR) in the short term. Analysts at HSBC note that the European Central Bank may cut interest rates more deeply than previously expected, cutting the key deposit rate by 25 basis points each time at upcoming meetings between now and April next year. Eurozone consumer confidence and industrial confidence indexes for September will be released on Friday. Any signs of improvement in the euro zone economy will help limit the euro’s losses in the short term.
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