Sterling stronger on BoE policy-easing prospects

The EURGBP pair extended its losing spree for the fifth trading session on Tuesday.

The cross weakened as the Pound Sterling (GBP) strengthened on expectations that the process of policy-easing by the Bank of England in the remaining year would be slower than other central bankers from its major peers.

BoE Governor Andrew Bailey said in his speech at the Jackson Hole Symposium on Friday that the central bank “would be careful not to cut interest rates too quickly or by too much”.

The BoE announced its first-ever interest rate cut on August 1, ending its two-and-a-half year-long restrictive monetary policy stance, as officials gained confidence that price pressures will return to the bank’s target of 2% sustainably.

Currently, financial markets expect that the BoE will deliver one more interest rate cut this year. The reasoning behind a shallow BoE policy-easing cycle is the improving UK economic outlook after flash S&P Global/CIPS PMI showed that activities in the manufacturing and the service sector rose at a faster-than-expected pace in August.

On the Eurozone front, the Euro underperforms as investors seem confident that the European Central Bank will cut interest rates again in the September meeting. Easing price pressures in the shared currency region and uncertain economic outlook have prompted ECB rate cut expectations.

For fresh interest rate cues, investors await the Eurozone flash Harmonized Index of Consumer Prices (HICP) data for August, to be published on Friday.

(Source: OANDA)