29 Oct 2024

target;-0.85500

sl;-0.82800

current;-0.83364

•     EUR/GBP strengthens to near 0.8340 in Tuesday’s early European session. 
•     ECB’s Wunsch said it is premature to discuss December policy decision. 
•     BoE is likely to cut its rate by a quarter-point in the November meeting to 4.75%, according to a Reuters poll. 

During the early European session on Tuesday, the EUR/GBP exchange rate is trading positively at approximately 0.8340. The Euro (EUR) has gained strength against the Pound Sterling (GBP) following remarks from European Central Bank (ECB) policymaker Pierre Wunsch. Investors are keenly awaiting the preliminary Gross Domestic Product (GDP) figures for the third quarter from both Germany and the Eurozone, which are scheduled for release on Wednesday.

There is a division among ECB officials regarding the need for a substantial interest rate cut. On Monday, Pierre Wunsch, who is also the chief of the Belgian central bank, expressed that there is no immediate need for the central bank to expedite interest rate reductions, suggesting that it could manage with a minor adjustment. These less dovish statements have provided some support for the Euro. Conversely, ECB Vice President Luis de Guindos remarked on Monday that while the central bank has made notable strides in reducing inflation, it is premature to declare victory.

 Despite this, money markets are still anticipating nearly a 50% chance of a half-percentage point reduction in the ECB's rates during the December meeting. The GDP data set to be released on Wednesday may offer insights into the economic conditions of Germany and the Eurozone. A weaker-than-expected result could heighten the probability of ECB rate cuts in December, potentially exerting downward pressure on the Euro.

 In contrast, the expectation that the Bank of England's (BoE) rate-cutting cycle may progress more slowly than that of the Eurozone could mitigate losses for the GBP. Economists surveyed by Reuters predict that the BoE will reduce its Bank Rate by a quarter-point to 4.75% on November 7, although nearly two-thirds of respondents foresee no change in December.