The EUR/GBP exchange rate slipped slightly to around 0.8410 during Thursday’s European session as investors positioned themselves ahead of the European Central Bank’s (ECB) key interest rate announcement at 12:15 GMT.
ECB Set to Cut Rates Again
The ECB is expected to deliver a 25 basis points cut to its key lending rate for the seventh consecutive time, marking the eighth cut since the expansionary monetary cycle began in June last year.
Market participants appear increasingly confident in this move, supported by the eurozone’s inflation rate returning to the ECB’s 2% target. However, concerns linger about the broader economic outlook for the eurozone, particularly following recent tariff announcements by U.S. President Donald Trump.
Investors will closely analyze the ECB’s monetary policy statement and the subsequent press conference with ECB President Christine Lagarde for insights into the bank’s plans for the second half of the year and whether the easing cycle will continue.
ECB Policymaker Signals Possible Pause After June Cut
Yannis Stournaras, an ECB policymaker and Governor of the Bank of Greece, recently indicated support for another June rate cut but hinted at a likely pause thereafter. As reported by Greek media, Stournaras said: “I expect another rate cut in June and then a pause.”
Economic Data Provides Mixed Signals
On the economic front, German factory orders for April surprised on the upside with a 0.6% month-on-month increase, outperforming economists’ expectations of a 1% decline. This marked a slowdown from March’s 3.4% growth but signals some resilience in the eurozone’s manufacturing sector.
GBP Supported by Bank of England Rate Speculation
Meanwhile, the British pound (GBP) gained mild support amid expectations that the Bank of England (BoE) will announce its monetary policy decision on June 19. With a relatively light calendar of economic data this week, traders are focusing on inflation trends and central bank guidance.
The BoE is less likely to cut rates further given the sharp rise in inflation in April. However, its rate decision will come just one day before the release of the UK Consumer Price Index (CPI) for May, which will be closely monitored for further clues on the UK economic trajectory.
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