Market Analysis

The EUR/GBP pair is trading relatively flat around 0.8330 during early Tuesday's European session. However, growing speculation that the European Central Bank (ECB) will reduce interest rates in October may limit the Euro's (EUR) upside against the British Pound (GBP).

On Monday, ECB President Christine Lagarde hinted at further rate cuts at the upcoming policy meeting in October, citing signs that inflation is under control and the economy is weakening. Lagarde expressed confidence that inflation is on track to reach the central bank's target, based on recent data, and that this will influence future policy decisions. The anticipation of an ECB rate cut is expected to put pressure on the Euro for now.

Traders are also keeping an eye on preliminary Eurozone inflation data for further direction. The Harmonized Index of Consumer Prices (HICP) is projected to rise by 1.9% year-on-year in September, while Core HICP is forecasted to increase by 2.9% year-on-year during the same period.

Meanwhile, the expectation that the Bank of England's (BoE) easing cycle will be milder than that of other G-7 central banks lends support to the GBP. Investors expect the BoE to implement one more 25-basis-point rate cut before the end of the year.

Paraphrasing text from "FX Street" all rights reserved by the original author.