The EUR/GBP pair extended its gains to nearly 0.8520 during early European trading on Tuesday. The Euro (EUR) strengthened against the Pound Sterling (GBP) amid growing market expectations that the European Central Bank (ECB) will pause its easing cycle. Traders are awaiting key economic data from Germany and the Eurozone, with the ZEW Survey scheduled for release later Tuesday.
ECB Signals End to Rate Cuts Amid Uncertainty
ECB officials have adopted a hawkish tone, supporting the Euro’s rise. ECB President Christine Lagarde indicated that rate reductions are nearing their end, stating the bank is “in a good position” to handle ongoing uncertainties, including new US tariffs.
Last week, ECB Executive Board member Isabel Schnabel also hinted that the central bank’s rate-cutting campaign may soon conclude, citing positive trends in inflation and economic activity. Similarly, ECB Governing Council member Gediminas Simkus called for a pause in rate cuts, highlighting the “very big uncertainty” caused by US tariff policies.
Pound Sterling Faces Pressure Amid BoE Rate Cut Expectations
The Pound Sterling continues to face selling pressure as traders increase their expectations for interest rate cuts from the Bank of England (BoE). This comes after a series of weaker-than-expected UK economic reports.
Most economists surveyed by Reuters expect the BoE to reduce its policy rate by 25 basis points in both the third and fourth quarters of 2025. These cuts would lower the bank rate to 3.75%, adding downward pressure on the GBP.
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