EUR/GBP edges lower as Sterling performs strongly across the board

• EUR/GBP ticks lower as Sterling gains on expectations that the BoE will leave interest rates unchanged in the policy meeting on December 19.
• EC officials see the impact of French political turmoil to be limited on the Eurozone.
• The ECB is expected to cut its Deposit Facility Rate by 25 bps to 3%.

The EUR/GBP pair ticks lower to near 0.8285 in Friday’s North American session after struggling to extend Thursday’s recovery above the key resistance of 0.8300. The cross drops as the Pound Sterling (GBP) performs strongly across the board on expectations that the Bank of England (BoE) will be among those central banks whose policy-easing cycle will be slowest.

Financial market participants expect the BoE to follow a gradual rate-cut approach on the assumption that price pressures in the United Kingdom (UK) economy are persistent. At the Global Boardroom event organized by the Financial Times (FT) on Thursday, BoE Monetary Policy Committee (MPC) external member Megan Greene said, “I suspect we'll hit our inflation target by the end of our forecast period, which is three years.”

While the UK economic calendar has nothing much to offer in a period of a week, the British currency is expected to be influenced by the market expectations for the BoE likely interest rate decision on December 19. Traders expect the BoE to leave interest rates unchanged by 4.75%.

Meanwhile, the Euro (EUR) rebounded after the European Commission spokesman Balazs Ujavri commented that the impact of French political turmoil would be limited and contained. "We follow very closely what is going on in France,” and "What we see for now is that the economic effect is rather contained and limited. The macroeconomic situation in France remains stable," Ujavri said, Reuters reported.

Michel Barnier’s government in the French economy collapsed after losing the no-confidence vote, which was proposed by the Far Right and the Left-wing.

However, the Euro’s upside remains limited as the European Central Bank (ECB) is widely anticipated to cut interest rates in its policy meeting on Thursday. Traders expect the ECB to cut is Deposit Facility Rate by 25 basis points (bps) to 3%.

(This story was corrected on December 6 at 13:58 GMT to say, in the first paragraph, that the pair is EUR/GBP, not EUR/USD.)