- EUR/GBP declines to around 0.8660 in Friday’s early European session.
- The ECB is widely anticipated to hike its deposit facility rate by 25 bps in June.
- Traders trimmed wagers on the extent of rate hikes from the BoE this year.
The EUR/GBP cross trades with mild losses near 0.8660 during the early European trading hours on Friday. Uncertainty surrounding the US-Iran peace deal is causing broader market fluctuations. The preliminary readings of Germany’s inflation will be the highlights later on Friday.
The US officials said that Washington and Tehran have reached an agreement on a memorandum of understanding (MoU) to extend the ceasefire for 60 days to allow for formal negotiations, but US President Donald Trump has yet to give his approval.
Markets are now pricing in a high probability of around 91% of a 25 basis point (bps) interest rate hike at the European Central Bank’s (ECB) next meeting on June 11, which would take the bank’s key deposit facility rate to 2.25%, and a 50% odds of another rate rise later this year in September, according to CNBC.
ECB Executive Board member Isabel Schnabel said that the central bank should raise interest rates next month even if there’s a quick resolution to the conflict in the Middle East.
The British Pound (GBP) might face some selling pressure following weaker UK economic data and fears over rising energy costs. Traders are increasingly concerned that prolonged energy shocks stemming from geopolitical tensions in the Strait of Hormuz will heavily dent UK consumer spending and limit how aggressively the Bank of England (BoE) can tighten policy.
“Traders now price one rate hike fewer in 2026 than at the end of the previous week, and gilt yields saw the biggest weekly drop since late-2023,” Pantheon Macroeconomics said in a note on Tuesday. “We estimate that lower yields were driven by lower oil prices, a fall in betting-market odds on Sir Keir Starmer being replaced, and Andy Burnham committing to maintain current fiscal rules,” they added.
BoE Governor Andrew Bailey, Catherine Mann, and Megan Greene are set to speak later this week. Any hawkish comments from policymakers could help limit the GBP’s losses in the near term.
- Euro drifts lower against British Pound ahead of Germany’s inflation data, BoE’s Bailey speech
- Euro remains vulnerable amid higher Crude prices, risk-off markets
- Gold declines as inflation worries weight despite Oil sell-off
- Gold struggles near $4,500 as bulls remain on the sidelines amid hawkish rate expectations
- Euro: Rangebound against US Dollar despite ECB repricing – Societe Generale.
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