The EURGBP is currently influenced by the debate over which central bank will make rate cuts first: the European Central Bank (ECB) or the Bank of England (BOE). According to swaps markets, there is an 84% chance of the ECB cutting rates in June, with expectations of two more cuts by the end of 2024. The decision on whether the ECB will cut rates in June will depend on the upcoming Eurozone inflation data. On the other hand, the UK is showing signs of higher inflation, leading markets to postpone expectations of a BOE rate cut until November, which may be the only cut this year.
From a technical perspective, the EUR/GBP is currently testing a crucial support zone between 0.8490 and 0.8505. A breakdown below this level could indicate bearish momentum for the pair. The outcome may be influenced by next week’s European inflation data and how it shapes expectations for the ECB meeting on June 6.
Overall, the market dynamics between the ECB and BOE are playing a significant role in shaping the future movements of the EURGBP pair. Traders will be closely watching economic data and central bank decisions for clues on the direction of the currency pair.