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EUR/GBP strengthens above 0.8300 despite rising bets of aggressive ECB rate cuts

25 Nov 2024


  • EUR/GBP drifts higher to around 0.8320 in Monday’s early European session. 
  • The weaker-than-expected Eurozone PMI triggers ECB rate-cut bets. 
  • The downbeat UK Retail Sales and flash PMI weigh on the GBP, but the cautious stance from the BoE might cap its downside

  • The EUR/GBP exchange rate has strengthened to approximately 0.8320 during the early hours of trading in Europe on Monday. However, the potential for further gains in the shared currency may be constrained by increasing speculation that the European Central Bank (ECB) will pursue significant interest rate reductions to support the struggling regional economy.

    Market participants are increasing their expectations that the ECB may implement a larger half-point rate cut following the disappointing Eurozone Purchasing Managers Index (PMI) data released on Friday. This development could lead to additional selling pressure on the Euro (EUR) in comparison to the Pound Sterling (GBP).

    Matthew Landon, a global market strategist at JP Morgan Private Bank, remarked, "This report truly puts a 50-basis-point cut on the table for December." Furthermore, Martins Kazaks, a member of the ECB Governing Council, indicated that the central bank should consider lowering interest rates next month in light of the weak economic conditions.

    The recent decline in UK Retail Sales and PMI data may enhance the dovish outlook for the Bank of England (BoE) in December, potentially exerting downward pressure on the GBP. Data from the Office for National Statistics (ONS) released on Friday revealed that UK Retail Sales fell by 0.7% month-on-month in October, compared to a revised increase of 0.1% in September. This result was below the market consensus of a 0.3% decline.

    Nevertheless, the cautious approach adopted by BoE officials may help mitigate further losses. Traders will be attentive to the speeches from Monetary Policy Committee members Clare Lombardelli, Swati Dhingra, and Huw Pill on Monday for additional insights.

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