- EUR/GBP maintains its position as the Euro remains stronger in PMI data from Eurozone and Germany.
- The ECB is widely expected to deliver a 25 basic point rate cut in June.
- Pound Sterling finds support, as the UK is seen as somewhat insulated from the impact of US tariffs.
The EUR/GBP is returning to recent losses from the previous session, which traded around 0.8510 during the first European hour of Tuesday. The pair is supported by a stronger Euro (EUR), which gets preceded by major purchases of index (PMI) managers (PMI) releases from Eurozone and Germany later in the day. The focus on the market will also return to the UK's S&P Global/CIPs PMI numbers.
Euro's strength complies with stable eurozone inflation data released last Friday. However, warmer-than-anticipated inflation numbers are unlikely to significantly change European Central (ECB) financial policy. ECB officials remain focused on slowing the economic momentum and overthrowing inflation risks, despite the new tariffs announced by US President Donald Trump increases external pressure. Markets continue to expect a 25 basic point rate cut at the June of June of the ECB, whose policy manufacturers are widely confident that inflation will return to 2% target this year.
On the other hand, Pound Sterling (GBP) also finds support, as the United Kingdom (UK) is seen as relatively insulated from the impact of US tariffs, Unlike China or EU, given to the US posted a $ 12 billion commodity in Britain in 2024. However, the GBP faced risks amid increased expectations that Bank of England (BOE) would reduce interest rates through 25 basis points to 4.25% at its policy meeting on Thursday.
Investors also look at the updated forecasts in the Boe's economy, which may provide clues to the possibility of further rates. Some analysts are expected that the central bank may adopt a greater tone in response to increasing global risks, especially those tied to President Trump's tariffs and the potential for a broader economic slowdown.
Central Banks FAQ
Central banks have a major mandate that ensures that there is price stability in a country or region. Economies continue to face inflation or deflection when prices for certain goods and services change. Continued rising prices for both goods means inflation, the continuous decrease of prices for both goods means deflection. This is the task of the central bank to keep the demand line by its policy rate. For the largest central banks such as the US Federal Reserve (FED), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to keep close to 2%.
A central bank has an important tool at its disposal to gain higher or lower inflation, and that is by the Benchmark policy policy rate, commonly known as an interest rate. In pre-communications moments, the Central Bank will issue a statement with its policy rate and provide further reasoning as to why it is left or changes (cutting or walking). Local banks arrange their savings and lending rates accordingly, which will make it harder or easier for people to earn their savings or for companies to take loans and make investments in their businesses. When the central bank walks interest rates, it is called financial finances. When it cuts its benchmark rate, it's called finances.
A central bank is often politically independent. Members of the Central Bank Policy Board pass through a series of panels and hearings before assigned to a policy board seat. Each member in that board often has a certain convincing how the central bank should control inflation and the subsequent financial policy. Members who want a very loose financial policy, with low rates and cheap lending, to boost the economy significantly while content to see inflation slightly more than 2%, are called 'dove'. Members who instead want to see higher rates to reward savings and want to maintain an inflation light at all times are called 'Hawks' and will not rest until inflation is at or just below 2%.
Usually, there is a chairman or president who leads each meeting, needs to create a consensus between hawks or doves and has its final one to say when it will drop to a split split to avoid a 50-50 tie if the current policy should be fixed. The chairman will deliver speeches that can often be followed live, where current finances and perspectives are conveyed. A central bank will try to push its financial policy without prompting violent swings at its rates, equality, or money. All members of the Central Bank will vacate their stance toward markets in advance of a policy meeting event. A few days before a policy meeting took place until the new policy was released, members were prohibited from communicating with the public. This is called the blackout period.
