EUR/GBP remains weak below 0.8250 ahead of ECB rate decision

EUR/GBP trades softer to around 0.8245 in Wednesday’s early European session.
Hopes of further ECB monetary easing on Thursday weigh on the Euro.
The BoE is expected to keep the rate on hold next week as policymakers signaled they will cut only gradually.

Lallalit Srijandorn FXStreet

The EUR/GBP cross remains on the defensive near 0.8245 during the early European trading hours on Wednesday. The growing speculation that the European Central Bank (ECB) will cut another interest rate at the December meeting continues to undermine the Euro (EUR) against the Pound Sterling (GBP).

Investors might prefer to wait on the sidelines ahead of the ECB interest rate decision on Thursday. The ECB is anticipated to cut the Deposit Facility Rate to 3.0% from 3.25%. It would be the ECB's third straight reduction amid a bleak eurozone outlook. "While there is a strong case for the ECB to accelerate the pace of policy easing by delivering a (half point) cut, a majority of the governing council seems to prefer a quarter-point reduction,” noted Capital Economics analysts.

On the other hand, the Bank of England (BoE) policymakers hinted that they would cut the interest rate gradually. "Signalling from the BoE about gradual rate reductions has been very strong of late, suggesting very low odds of a cut next week," said JP Morgan economist Allan Monks.

Traders are currently betting on the BoE cutting interest rates only three times between now and the end of 2025, lowering the Bank Rate by a total of 75 bps. The expectation that the UK central bank will likely move more slowly to reduce borrowing costs than the ECB provides some support to the GBP and creates a headwind for the EUR/GBP cross.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day, according to data from the Bank of International Settlements. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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