EUR/GBP rises to near 0.8350, awaits BoE Governor Bailey's speech

EUR/GBP extends its gains for the second consecutive day, trading around 0.8350 during the European hours on Tuesday. The currency cross appreciated as the Pound Sterling (GBP) lost ground following the remarks from Bank of England (BoE) Monetary Policy Committee member Catherine Mann late Monday.

BoE’s Mann stated that United Kingdom’s (UK) businesses may struggle to raise prices this year as job losses and weaker consumer spending dampen inflation, according to the Financial Times. Mann, who is scheduled to speak again, suggested that corporate pricing power is fading, reducing inflationary pressures. BoE Governor Andrew Bailey's remarks later on Tuesday will also be closely watched. 

On the data front, the British Retail Consortium (BRC) Like-for-Like Retail Sales in the UK increased by 2.5% year-on-year in January 2025, slowing from December’s 3.1% gain but surpassing market expectations of 0.2%. BRC Chief Executive Helen Dickinson noted that while the performance remains strong, its sustainability in the coming months remains uncertain.

On Monday, US President Donald Trump implemented a 25% tariff on steel and aluminum imports, eliminating all exemptions and overriding previous trade agreements with key US allies. Earlier, German Chancellor Olaf Scholz warned that the European Union (EU) could respond “within an hour” if the US proceeded with the proposed tariffs on European goods. This escalation in trade tensions is increasing risk aversion, putting pressure on the risk-sensitive Euro and capping gains for the EUR/GBP cross.

Additionally, the Euro could face challenges amid rising concerns over potential deflationary pressures in the Eurozone due to expected US tariffs have intensified odds of deeper ECB rate cuts, with markets now predicting the deposit rate could fall to 1.87% by December.