EUR/GBP displays a short-lived bounce from 0.8400 on ECB-BOE divergence

EUR/GBP has found bids around 0.8400 in early Tokyo as investors await a speech from ECB’s Lagarde.

• The ECB adopted a dovish stance at the IMF meeting along with a slash in the growth forecasts.
• The BOE sees its inflation galloping higher this year amid higher energy bills.

The EUR/GBP pair is observing a minor bounce from 0.8400 after a steep fall from Monday’s high at 0.8440. The pair has remained firmer over the past few trading days despite European Central Bank (ECB) advocating a dovish stance on his testimony at the International Monetary Fund (IMF) meeting.

The ECB officials don’t see a rate hike till it concludes its Asset Purchase Program (APP). The central bank has emphasized reducing growth forecasts amid the Ukraine crisis and a significant plunge in the real income of the households due to higher energy bills and commodity prices. The circumstances are compelling a situation of stagflation in the eurozone. Meanwhile, investors are focusing on the speech from ECB’s President Christine Lagarde, which is due on Wednesday. The speech will provide cues for the plot of the monetary policy to be dictated in the policy announcement.

Meanwhile, Bank of England (BOE) Governor Andrew Bailey in his testimony on Thursday renewed fears of soaring inflation in the sterling area.  As per his dictation investors should start bracing for a further jump in inflation, which may move the interest rates higher.

Although a speech from ECB’s Christine Lagarde on Wednesday will hold significant importance, investors will also focus on eurozone Consumer Confidence, which is due on Thursday. The Euro Consumer Confidence is seen at -16.9, similar to its previous close.