The EUR/GBP currency pair is trading in positive territory around 0.8340 on Tuesday during the early European session. Comments from European Central Bank (ECB) policymaker Pierre Wunsch have strengthened the Euro (EUR) against the Pound Sterling (GBP). Investors are now awaiting preliminary Gross Domestic Product (GDP) data for the third quarter from Germany and the Eurozone, set to be released on Wednesday.
ECB officials are divided on the urgency of implementing significant rate reductions. On Monday, Wunsch, who is also the head of the Belgian central bank, stated that there is no immediate need for the ECB to hasten interest rate cuts, suggesting that the bank could manage with only minor adjustments. His less dovish remarks have provided some support for the Euro. In contrast, ECB Vice President Luis de Guindos remarked on Monday that while the central bank has made significant strides in reducing inflation, it is too early to declare victory.
Despite these comments, money markets are still pricing in nearly 50% odds of a 50 basis point rate cut by the ECB at its December meeting. The GDP figures set to be released on Wednesday may offer insights into the economic health of Germany and the broader Eurozone. A weaker-than-expected GDP outcome could increase the likelihood of ECB rate cuts in December, potentially dragging the Euro lower.
Conversely, expectations that the Bank of England‘s (BoE) rate-cutting cycle may proceed more slowly than that of the Eurozone could help mitigate losses for the Pound. According to a Reuters poll, economists expect the BoE to reduce its Bank Rate by a quarter-point on November 7 to 4.75%, but a near two-thirds majority of respondents anticipate no further changes in December.
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