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Euro steadies near three-week highs vs British pound
EUR/GBP was holding around the mid-0.8550s as oil prices fell, supporting the euro even as risk-off sentiment capped rallies.
The euro consolidated just below three-week highs against the British pound, trading sideways in the mid-0.8550s, according to FXStreet on Tuesday. The outlet said risk-off sentiment weighed on euro gains, while GBP upside was also limited by UK fiscal concerns and investor caution ahead of the Bank of England meeting later this week.
FXStreet pointed to a pause in US and Iran hostilities and the subsequent decline in oil prices as underpinning factors for the common currency. It added that the euro is also supported by the European Central Bank’s hawkish tilt after last week’s communication.
The ECB kept rates on hold after a 25-basis-point June hike, while signaling a further rate increase in September as energy prices continue to push inflation pressures higher, FXStreet said. In the UK, attention this week centers on whether the BoE will leave Bank Rate unchanged at 3.75%, with investors looking for hawkish dissent and comments from Governor Bailey that could confirm expectations of a later-year hike.
FXStreet noted ING’s view that the BoE may stay on hold through 2026, arguing updated projections are likely to keep inflation fairly close to 3% in the second half of 2024 and into early 2025, within the bank’s tolerance. The outlet also cited ING projections for two cuts from spring 2027 that depend on no material fiscal stimulus at the Autumn Budget, and said the pound has been pressured by concerns about financing for Prime Minister Andy Burnham’s spending pledges, including caps on transport fares and electricity bills.