The EUR/GBP pair maintains its upward momentum near 0.8725 in early European trading on Tuesday. The Pound Sterling remains under pressure against the Euro as political uncertainty in the United Kingdom and rising expectations of a potential Bank of England (BoE) rate cut weigh on sentiment. Investors are now turning their attention to the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data due later in the day.
Political developments in the UK are adding to Sterling’s weakness. The Labour Party’s significant by-election defeat in Gorton and Denton has intensified scrutiny around Prime Minister Keir Starmer’s leadership, creating additional uncertainty in domestic markets.
Market participants are also closely assessing the BoE’s policy outlook. Although Governor Andrew Bailey refrained from signaling an immediate rate cut in March, expectations for monetary easing remain elevated. The Pound continues to react sensitively to any indications of a shift toward looser policy. The next BoE policy decision is scheduled for March 19.
Meanwhile, analysts widely expect the European Central Bank (ECB) to keep interest rates steady at least until mid-2026. However, the recent surge in oil prices has prompted some policymakers to adopt a more flexible stance, suggesting rates could move in either direction if economic risks intensify.
On Monday, ECB policymaker Martin Kocher emphasized that the central bank must remain ready to adjust rates swiftly should new economic threats arise, signaling a departure from a strictly pre-determined policy path.
