EUR/GBP Drops Below 0.8400 on ECB Rate Cut Speculation

EUR/GBP Drops Below 0.8400 on ECB Rate Cut Speculation

The EUR/GBP currency pair extended its losses during Thursday’s early European session, falling to 0.8375 as the Euro (EUR) weakened against the British Pound (GBP). The decline follows poor German labor market data and increasing speculation of a European Central Bank (ECB) rate cut in June.

Weak German Data Fuels ECB Dovishness

According to data released by the German Statistics Office, the Unemployment Rate in Germany held steady at 6.3% in April. However, Unemployment Change surged to 34K, sharply above the expected 11K and the prior reading of 4K. This deterioration reinforces expectations that the ECB may act to support the weakening Eurozone economy.

ECB Rate Cut Expectations Build

ECB Governing Council member Francois Villeroy de Galhau stated that inflationary pressures remain limited, leaving room for further rate cuts. Analysts at Rothschild Wealth Management expect a 25 basis point rate cut next week, bringing the deposit rate down to 2.00%.

GBP Strength Supported by BoE Prudence

On the other hand, the Bank of England (BoE) maintains a measured and cautious approach to monetary policy. Deputy Governor Sarah Breeden is scheduled to speak Thursday, and traders are watching for any shift in tone that might impact GBP demand.

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