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- EUR/GBP trades on a stronger note near 0.8750 in Tuesday’s early European session.
- Market pricing suggests around a one-in-three chance of a cut, with traders largely expecting the BoE to hold rates steady.
- French MPs vote against wealth tax, raising fears of political instability.
The EUR/GBP cross gains traction to near 0.8775, snapping the two-day losing streak during the early European session on Tuesday. The Pound Sterling (GBP) softens against the Euro (EUR) amid uncertainty surrounding the Bank of England’s (BoE) interest rate decision, which will be scheduled on Thursday.
The BoE is anticipated to hold the interest rates at 4.0% at its November policy meeting on Thursday, although some analysts expect a potential cut after softer inflation and wage data. Markets are now pricing in a 1-in-3 chance of a quarter-point cut, according to Reuters.
Traders will closely monitor the BoE’s Governor Andrew Bailey speech after the meeting, as it might offer some hints about the UK interest rate path. Any dovish comments from BoE policymakers could weigh on the GBP and create a tailwind for the cross.
On the Euro front, the European Central Bank (ECB) left its deposit rate unchanged at 2.0% for a third meeting last week. ECB President Christine Lagarde highlighted that the central bank is “in a good place” and further stated it will do whatever is needed to stay in such a favorable position. Meanwhile, ECB Governing Council member Joachim Nagel said on Monday that Eurozone economic data aren’t diverging from the ECB’s outlook, but policymakers are keeping their options open.
French PM Sebastien Lecornu’s government is under pressure after the lower house of parliament rejected a wealth tax, as expected. Lecornu hopes to escape the fate of his predecessors, who were forced to resign after facing no-confidence votes over their finance plans, and another government collapse would likely lead to snap elections. Uncertainty and renewed fears of political turmoil in France could drag the EUR lower against the GBP in the near term.
