Eurgbp Weak On Boe Comments

Eurgbp Weak On Boe Comments by Andrew Blumer last updated on March 06, 2024

Eur/Gbp Weak Near 0.8560 On Boe Comments

The 5-day winning streak of EUR/GBP has finally concluded. The pair shows a bearish trend, trading near the 0.8560 handle on Wednesday.

The real reason that led to the turnaround in EUR/GBP was GBP's strength after Andrew Bailey's comments (BoE governor).

Bailey, along with other members of the BoE, appeared before the parliament to testify. One particular comment from Bailey that attracted the most attention was related to interest rate cuts. He added that the speculations regarding this matter are not entirely unreasonable.

Uk Recovering From Recession

Another noteworthy comment was that the UK's economy was recovering from a recession in late 2023. He says rate cuts can only happen if the UK's annual inflation drops under 2%. However, he didn't provide a definite timeline for the expected rate cuts this year.

The testimony also included details that services' inflation and wage growth are almost double the value of the interest rate. Additionally, more than the UK's current economic data is insufficient to warrant a rate cut.

The bottom line is that the EUR is struggling against the GBP, given the circumstances. It is only apparent as the market's mood is still cautious as investors try to identify early interest rate cut policy cues.

Elsewhere, China has already introduced a 25 bps rate cut to its 5-year loan rate (LPR). This factor supports the EURO as it is closely linked to China.

For now, the critical event that the EUR/GBP traders are closely watching is the PMI release for the UK and Eurozone. Since it involves the EU and the UK, it has the right recipe to dictate the next move in EUR/GBP.

According to Christine Lagarde, there's a close relationship between wage data and monetary easing in the UK.