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Market Analysis

Because of growing anticipations of an ECB rate decrease later this week, EUR/GBP drops below 0.8450
Amos Simanungkalit · 8.7K Views

15

The EUR/GBP pair has pulled back from its recent gains, trading around 0.8440 during Monday's European session. The Euro is facing headwinds as recent inflation data from the eurozone has strengthened expectations of a rate cut by the European Central Bank (ECB) at its policy meeting this Thursday.

With headline inflation nearing 2% and long-term forecasts remaining steady at similar levels, the ECB has ample reason to further ease its monetary policy. Additionally, last week’s mixed GDP data from the Eurozone has added to the likelihood of a rate cut by the ECB.

Concerns about slower economic growth have raised alarms that high interest rates could be hampering expansion, echoing sentiments expressed by ECB Executive Board member Piero Cipollone. Cipollone warned of "a real risk that the ECB’s stance may become overly restrictive," underscoring the potential negative effects of current monetary policy on growth.

Meanwhile, the British Pound (GBP) is holding steady as investors await the release of the UK’s employment data for the three months ending in July, scheduled for Tuesday. This labor market report is expected to influence market sentiment surrounding the Bank of England's interest rate decisions for the rest of the year.

Forecasts suggest a slight drop in the ILO Unemployment Rate to 4.1% from the previous 4.2%. Additionally, Average Earnings, including bonuses, are expected to slow to 4.1%, down from the prior 4.5% figure. Slower wage growth could increase expectations for further rate cuts by the Bank of England, signaling a possible decline in inflation within the services sector.

 

 

 

 

 

Paraphrasing text from "FX Street" all rights reserved by the original author.

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