EUR/GBP it remains muted for the fourth session in a row, trading around 0.8790 during European hours on Monday. A reduction in the currency cross could be restrained as the euro (EUR) gains support amid prevailing cautious sentiment around the European Central Bank’s (ECB) policy outlook. The ECB is expected to keep rates unchanged for some time, with money markets now pricing in just a 45% chance of a rate cut by September 2026, down sharply from more than 80% in October.
ECB Vice President Luis de Guindos said on Monday that there is no need to adjust current interest rates unless inflation trends change or projections are revised. Guindos noted that services and wages are moving in the right direction, inflation is nearing the 2% target, and while growth remains positive, it is still moderate.
ECB policymaker Francois Villeroy de Galhau stressed the need to keep policy options open, while Governing Council member Joachim Nagel called for vigilance on inflation. Meanwhile, Vice President Luis de Guindos said any dip in inflation below 2% was likely to be temporary.
The EUR/GBP cross could move higher as the pound sterling (GBP) may face downward pressure on growing expectations that the Bank of England (BoE) will cut interest rates at its December meeting. BoE Governor Andrew Bailey has hinted that a rate cut is on the horizon, with economists now expecting a pre-Christmas cut. However, the central bank emphasized that future easing will depend on inflation view is developing.
