EUR/GBP remained soft for the fourth consecutive session, trading around 0.8790 during European hours on Monday. The downside of the currency cross could be curbed with support for the Euro (EUR) amid prevailing cautious sentiment around the European Central Bank (ECB) policy outlook. Expectations are that the ECB will keep rates unchanged for some time, with money markets now pricing in only a 45% chance of a rate cut by September 2026, down from more than 80% in October.
ECB Vice President Luis de Guindos said on Monday there was no need to adjust interest rates at current rates unless inflation trends change or projections are revised downwards. Gindos said services and wages are moving in the right direction, inflation is close to the 2% target, and while growth remains positive, it is still modest.
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 drop in inflation below 2% would likely be temporary.
The EUR/GBP cross may move higher as the Pound Sterling (GBP) may face downward pressure amid rising expectations that the Bank of England (BoE) will cut interest rates at its December meeting. BoE Governor Andrew Bailey hinted that a rate cut is on the horizon, with economists now expecting a cut before Christmas. However, the central bank stressed that future easing will depend on how the inflation outlook evolves.
