The EUR/GBP currency pair hovered above a fresh 23-week low of 0.8616 on Wednesday ahead of the outcome of the European Central Bank’s and the Bank of England’s policy meetings.
The European Central Bank is largely expected to keep its main refinancing operations rate intact at 2.15% at its February 5th policy meeting.
And, the ECB deposit facility rate is expected to be kept at 2.00%.
In December, the ECB Governing Council reaffirmed its objective of bringing inflation back to the 2% target over the medium term and reiterated that rate decisions would continue to be taken on a meeting-by-meeting basis.
ECB President Lagarde emphasized that the central bank did not have a predetermined path for interest rates and, given the high degree of uncertainty, it could not provide forward guidance.
Meanwhile, the Bank of England is expected to leave its benchmark interest rate intact at 3.75% at its February 5th meeting.
In December, the BoE reduced its policy rate by 25 basis points in a decision that revealed significant internal disagreement, with a 5-4 vote on the Monetary Policy Committee.
Four MPC members favored keeping the rate unchanged at 4.00%, highlighting ongoing divergence over the appropriate pace of easing.
The BoE had said that policy settings would follow a gradual downward trajectory rather than a sharp easing move. It said the scale of any additional rate reductions would depend on how the inflation outlook develops.
Inflation in the UK has remained well above the BoE’s 2% target, even after moderating in recent months.
While BoE officials still saw room for more rate cuts over time, they warned that subsequent decisions on easing were becoming a “closer call.”
The EUR/GBP currency pair was last down 0.04% on the day to trade at 0.8618.
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