EUR/GBP holds in tight range, cenbank meetings ahead

The EUR/GBP currency pair held within a tight daily range on Thursday 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 April 30th meeting.

And, the ECB deposit facility rate is expected to be kept at 2.00%.

The ECB’s March decision to hold rates was framed against a backdrop of uncertainty around inflation and growth linked to joint military operations by the United States and Israel against Iran.

ECB President Christine Lagarde had cautioned that the “increase in energy prices will drive inflation above 2% in the near term.”

A report by Reuters had suggested that the ECB might consider discussing an increase in key borrowing costs in April and could move to raise rates in June if elevated energy prices persist.

Meanwhile, the Bank of England is expected to leave its benchmark interest rate intact at 3.75% at its April 30th meeting.

In March, the BoE highlighted global energy price risks from the Middle East conflict and stressed readiness to act to maintain 2% CPI inflation in the medium term.

Inflation projections showed potential increase to around 3% in Q2 and up to 3.5% in Q3.

Data by the Office for National Statistics showed that the UK Consumer Price Index had risen 3.3% year-on-year in March. It followed two consecutive months of 3% annual inflation and underscored the inflationary impact of the Middle East war.

Yet, BoE Governor Andrew Bailey noted that spare economic capacity could help contain inflation.

Although the central bank opted to leave interest rates unchanged, its March communication was perceived as more hawkish than markets had anticipated. Rate hike expectations for later this year have risen after the March announcement.

The EUR/GBP currency pair was last down 0.06% on the day to trade at 0.8660.