- EUR/GBP gains ground near 0.8725 in Tuesday’s early European session.
- A significant by-election defeat for the Labour government weighs on the Pound Sterling.
- ECB’s Kocher said the central bank should be ready to move rates quickly in either direction.
The EUR/GBP cross holds positive ground around 0.8725 during the early European session on Tuesday. The Pound Sterling (GBP) softens against the Euro (EUR) amid political uncertainty in the UK and growing expectations of the Bank of England (BoE) rate cut. The preliminary reading of the Harmonized Index of Consumer Prices (HICP) from the Eurozone will be in the spotlight later on Tuesday.
Domestic political uncertainty exerts some selling pressure on the Pound Sterling. A landmark by-election loss for the Labour Party in Gorton and Denton raises questions about Prime Minister Keir Starmer’s leadership.
Furthermore, traders will closely monitor potential rate cuts. While BoE Governor Andrew Bailey recently stopped short of committing to an imminent March rate reduction, the GBP remains sensitive to any signals of monetary easing. The next BoE policy meeting is scheduled for March 19.
Analysts expect the European Central Bank (ECB) to leave rates unchanged through at least mid-2026. However, a spike in oil prices has led some policymakers to suggest the central bank should be prepared to move rates in either direction if economic uncertainty persists.
ECB policymaker Martin Kocher said on Monday that the central bank should be prepared to move rates “quickly in either direction” if fresh economic threats emerge, highlighting a shift away from a pre-determined path.
