Key Moments
- EUR/GBP is trading around 0.8630, hovering near a five-month low as of Tuesday.
- Both the ECB and BoE are widely expected to leave interest rates unchanged at their Thursday meetings.
- Upcoming preliminary inflation releases for the Eurozone and the UK are shaping expectations for future policy moves.
EUR/GBP Steadies Ahead of Central Bank Decisions
EUR/GBP is trading cautiously around 0.8630 on Tuesday at the time of writing, keeping close to its lowest level in five months. The cross is showing limited directional conviction as market participants reduce risk and refrain from aggressive positioning before the European Central Bank (ECB) and Bank of England (BoE) announce their policy decisions on Thursday.
The consensus view in the market is that both central banks will keep interest rates unchanged. For the Eurozone, expectations center on the ECB maintaining its Deposit Facility Rate at 2%, with inflation broadly aligned with the institution’s 2% target. The anticipated moderation in headline inflation, largely attributed to energy-related base effects that the ECB has already characterized as temporary, reinforces this stance.
Eurozone Inflation Outlook Supports a Wait-and-See Stance
In the run-up to the ECB meeting, attention is focused on Wednesday’s release of the preliminary January reading of the Eurozone Harmonized Index of Consumer Prices (HICP). Market expectations point to headline inflation increasing by 1.7% year-over-year, down from 1.9% in December. Core inflation, which excludes more volatile items, is projected to stay unchanged at 2.3%.
Such outcomes would likely underpin the ECB’s cautious and patient approach, providing little impetus for an immediate adjustment in policy settings. With headline and core measures evolving in line with projections, investors see limited scope for a near-term shift in the central bank’s stance.
BoE Faces Complications from Rising UK Inflation
In the United Kingdom, the BoE is likewise expected to keep its main policy rate steady at 3.75%. Policymakers judge that the full economic impact of the 25-basis-point rate cut implemented in December has not yet been fully transmitted to the broader economy. At that earlier meeting, officials emphasized that the direction of policy remains on a gradual easing trajectory.
However, a recent uptick in inflation is complicating the short-term outlook for additional easing. In December, the UK Consumer Price Index (CPI) climbed by 3.4% year-over-year, compared with 3.2% in November, interrupting the previous spell of moderation. This renewed inflationary pressure may prompt BoE officials to act more carefully and avoid delivering consecutive rate cuts in quick succession.
Within this environment, EUR/GBP continues to trade near its recent lows, as investors seek clearer evidence on how the respective policy paths in the Eurozone and the UK will evolve after the upcoming decisions.
Euro Performance Against Major Currencies
The following table summarizes the percentage change of the Euro (EUR) relative to major currencies today. According to the data, the Euro has shown its strongest performance against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.07% | 0.19% | -0.10% | -0.83% | -0.57% | -0.29% | |
| EUR | 0.03% | -0.03% | 0.22% | -0.08% | -0.80% | -0.54% | -0.26% | |
| GBP | 0.07% | 0.03% | 0.26% | -0.04% | -0.76% | -0.50% | -0.22% | |
| JPY | -0.19% | -0.22% | -0.26% | -0.27% | -1.00% | -0.75% | -0.46% | |
| CAD | 0.10% | 0.08% | 0.04% | 0.27% | -0.73% | -0.47% | -0.19% | |
| AUD | 0.83% | 0.80% | 0.76% | 1.00% | 0.73% | 0.27% | 0.54% | |
| NZD | 0.57% | 0.54% | 0.50% | 0.75% | 0.47% | -0.27% | 0.28% | |
| CHF | 0.29% | 0.26% | 0.22% | 0.46% | 0.19% | -0.54% | -0.28% |
The heat map should be read using the base currency from the left-hand column and the quote currency from the top row. For example, selecting the Euro in the left-hand column and moving horizontally to the US Dollar column shows the percentage change for EUR (base)/USD (quote).
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