The EUR/GBP exchange rate remained range-bound during the Asian session on Tuesday, hovering near a nearly three-week low of around 0.8345, which was reached the previous day.
The British Pound (GBP) continues to show strength, driven by the Bank of England‘s (BoE) hawkish monetary policy stance. The BoE has cautioned against expectations for imminent interest rate cuts and raised its forecast for peak inflation in the UK this year, signaling that borrowing costs may remain higher for longer compared to other major central banks.
In addition, stronger-than-expected UK economic data further bolstered the GBP. The S&P Global Services PMI for March rose to 53.2, significantly up from the previous month’s reading of 51.0. Meanwhile, the Composite PMI increased to 52.0 from 50.5, marking the largest rise in six months. However, the gains were tempered by a sharp decline in the Manufacturing PMI, which fell to 44.6 in March, down from 46.9 in February.
On the other hand, the Eurozone saw a faster-than-expected acceleration in business activity in March, with the flash PMI showing its strongest growth in seven months. This has dampened expectations for aggressive policy easing by the European Central Bank (ECB) and, combined with a subdued US Dollar (USD), has provided some support to the Euro. These factors suggest that further losses in the EUR/GBP pair may be limited, and caution is advised before taking new bearish positions.
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