The EUR/GBP pair trades modestly higher around the 0.8650 level during the late Asian session on Thursday. The uptick comes as the Pound Sterling underperforms, with traders remaining cautious ahead of the Bank of England’s (BoE) monetary policy announcement scheduled for 12:00 GMT.
The BoE is widely expected to keep interest rates unchanged at 3.75% following a rate cut at its previous meeting. Policymakers had earlier signaled that monetary policy would continue on a “gradual downward path.” As a result, market participants will closely analyze the policy statement and Governor Andrew Bailey’s press conference for clearer guidance on the future interest rate outlook.
The UK central bank is likely to maintain its stance on gradual easing, citing subdued labor market conditions and expectations that inflation will return to the 2% target in the second quarter of this year. However, recent data showed that Consumer Price Index (CPI) inflation picked up in December after easing in October and November, adding a layer of uncertainty to the outlook.
Meanwhile, the Euro remains broadly stable ahead of the European Central Bank’s (ECB) interest rate decision at 13:15 GMT. The ECB is also expected to hold rates steady, with officials emphasizing that policy adjustments would only be warranted in the event of a significant shift in inflation or employment trends.
Supporting the cautious tone, Eurozone preliminary Harmonized Index of Consumer Prices (HICP) inflation eased to 1.7% year-on-year in January, in line with expectations, down from 1.9% in December.
