Market Analysis

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The EUR/GBP pair is gaining momentum, approaching 0.8380 during the early European session on Monday. The Euro (EUR) strengthens against the Pound Sterling (GBP) following Germany’s upper house of parliament approval of a significant debt reform plan. Later in the day, attention will turn to the preliminary Purchasing Managers Index (PMI) reports from Germany and the Eurozone.

On Friday, Germany's Bundesrat, the second chamber of parliament, approved a large-scale spending package that will allocate billions of euros toward defense, infrastructure, and climate protection. This development continues to provide support for the Euro in the short term.

Meanwhile, the Pound Sterling has weakened after the Bank of England (BoE) kept interest rates unchanged at 4.5% on Thursday, a decision that had been widely expected. Despite the steady rate decision appearing somewhat hawkish, BoE Governor Andrew Bailey stated that there is considerable uncertainty, although he believes the monetary policy is on a “gradually declining path.”

The uncertain UK economic outlook, coupled with global policy instability and low confidence, could put further pressure on the GBP. Investors will closely watch the UK Consumer Price Index (CPI) inflation data for February, set to be released on Wednesday, for further guidance.

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