The EUR/GBP currency pair rebounded from a 2-week low of 0.8620 on Thursday ahead of the outcome of the European Central Bank’s policy meeting.
The ECB is largely expected to raise its main refinancing operations rate by 25 basis points to 2.40% at its June 11th meeting.
And, the ECB deposit facility rate is expected to be raised to 2.25%.
This move would make the central bank the first among its major peers to tighten policy in reaction to a surge in energy prices linked to the conflict in the Middle East.
Any signals of a more aggressive tightening path or firm anti-inflation stance from ECB officials could offer additional near-term support to the Euro.
At the same time, traders have been dialing back expectations for additional aggressive BoE rate hikes following softer UK consumer inflation data and an unexpected increase in the UK unemployment rate.
Also, political uncertainty in the United Kingdom, including challenges to Prime Minister Keir Starmer’s leadership, posed a potential headwind for the Pound.
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