Eurgbp Trades With Bearish Bias

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Eurgbp Trades With Bearish Bias

Eur/Gbp Trades Near 0.8550 With Bearish Bias

The talk of the town is a delay in rate cuts whether we look at the Fed, RBA, or even the BoE. According to forecasts, the Bank of England will likely start to think about rate cuts from Q3 2024. This was not taken well by the EUR/GBP as it turned red for the 3rd session in a row.

For now, the EUR/GBP is trading near the 0.8550 with a bearish bias as the EUR is under pressure after the announcement of BoE's delay in rate cuts. The theory is that the ECB will be the first one to cut rates while the BoE will wait till the 3rd or 4th quarter.

10-Y Bond Yields Trade At 4.31%

According to media reports, the chief economist from BoE commented on how the interest rate cuts are still a long way. However, he also added that an improved inflation situation and the passage of time have brought the rate cuts closer.

The 10-year UK bond yields can be seen at nearly 4.31%, hovering at 5-month highs. A fresh increase was seen in the bond yields after the expectations that the BoE would likely delay the rate cuts.

At the same time, the concerns regarding stubborn inflation in the UK are very real. When this is combined with a strong domestic PMI, it makes sense for the GBP to advance against the EUR.

If we look at Europe, it looks like the policymakers from the ECB are still on the path to lowering the rates, but it will take some time. According to the ECB president, there's still a chance of lowering the deposit rates in June. These comments have sent the EUR/GBP lower as there is still no such confirmation from the UK's side.

Additionally, a board member of the ECB said that there are many obstacles to achieving the 2% inflation target. When we consider a drop in productivity along with high costs of service, it becomes the perfect recipe for higher inflation.

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