- EUR/GBP holds steady near 0.8720 in Tuesday’s early European session.
- ECB hawkish tone could underpin the Euro against the Pound Sterling.
- Bank of England is anticipated to hold rates this year, according to a Reuters poll.
The EUR/GBP cross trades on a flat note around 0.8720 during the early European session on Tuesday. Traders will take more cues from the Eurozone Retail Sales and German inflation data, which are due later this week. These reports could offer some cues about the European Central Bank (ECB) interest rate path this year.
Meanwhile, the Euro (EUR) could receive some support from the hawkish tone of the European Central Bank (ECB). ECB President Christine Lagarde emphasizied that policy will remain restrictive until inflation sustainably returns to the 2% target.
Additionally, ECB policymaker Francois Villeroy de Galhau said last week that the central bank’s next interest rate move will very likely be an increase although it is still too early to say when it will start hiking. Markets have priced in 2–3 interest rate hikes for 2026 due to surging energy-driven inflation, a significant shift from previous expectations of holding rates.
The Bank of England (BoE) has shifted from a bias toward cutting rates to a “wait-and-see” stance. The UK central bank is expected to hold Bank Rate at 3.75% for the rest of the year, according to a narrow majority of economists polled by Reuters who have mostly abandoned their previous expectations for cuts but have not followed financial markets in expecting nearly three rate rises this year.
