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The EUR/GBP cross struggled to gain any meaningful momentum, spending the first half of Tuesday’s European session in a tight trading range below the 0.8400 round-figure mark. Investors appear reluctant to make aggressive directional bets, instead choosing to wait and see ahead of Thursday’s key Bank of England (BOE) policy decision.
The Bank of England is widely expected to focus on the longer-term outlook for slowing inflation and vote to cut interest rates for the second time this year. Still, expectations that Chancellor of the Exchequer Rachel Reeves’ first budget will push up inflation and prompt the Bank of England to cut interest rates more gradually are the main headwinds for the EUR/GBP cross. However, downside in the EUR/GBP cross remained cushioned amid bets that the European Central Bank (ECB) will become less dovish.
Data released last week showed euro zone inflation rose to 2% in October. Additionally, better-than-expected GDP growth data from the euro zone’s largest economy suggested the European Central Bank will stick with a 25 basis point rate cut at its next policy meeting in December. This, in turn, continues to support the euro, failing to help the EUR/GBP cross shed momentum on last week’s break above the 50-day moving average (SMA).
Investors also tended to wait and see ahead of uncertainty about the U.S. presidential election and a speech by European Central Bank President Christine Lagarde on Wednesday. Therefore, it would be wise to wait for strong follow-through buying before EUR/GBP rebounds recently from sub-0.8300 levels.
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