EUR/GBP Gains Ground Ahead of ECB Speeches
- The Euro faces challenges as the ECB is expected to deliver another rate cut in October.
- The Pound Sterling receives support as the BoE is expected to reduce rates more gradually compared to other central banks.
EUR/GBP is retracing its recent losses and trading around 0.8340 during Friday’s Asian hours. However, further gains may be limited due to the Euro’s weak performance against major currencies. Speculation is rising that the European Central Bank (ECB) could lower the Deposit Facility Rate for the second consecutive time next month, marking the ECB’s third dovish move this year.
ECB Speeches and Rate Cut Expectations
ECB Chief Economist Philip Lane is expected to deliver opening remarks at a conference in Dublin, Ireland, while ECB board member Piero Cipollone will speak at a conference organized by the Austrian Central Bank. Economists at HSBC anticipate the ECB to reduce interest rates by 25 basis points at each meeting from October through next April. Societe Generale economist Anatoli Annenkov suggests a case for front-loading rate cuts for more aggressive action.
BoE Rate-Cutting Cycle
On the GBP side, expectations that the Bank of England’s rate-cutting cycle will proceed more slowly than the ECB’s should continue to support the British Pound and exert downward pressure on the EUR/GBP cross. The BoE allotted 37.059 billion pounds in seven-day funds during its weekly short-term repo on Thursday, down from last week’s record of 44.523 billion pounds.
Analysis:
The Euro and Pound Sterling are both facing unique challenges and opportunities based on the actions of their respective central banks. The ECB’s potential rate cut could weaken the Euro further, while the BoE’s gradual approach to rate cuts may strengthen the Pound. For investors and traders, understanding these central bank policies and their implications on currency pairs like EUR/GBP is crucial for making informed decisions and managing risk effectively in the volatile forex market.