EUR/GBP turns sideways above 0.8800 ahead of ECB monetary policy

• EUR/GBP is showing a lackluster performance above 0.8800 as focus shifts to ECB policy.
• Investors are divided about the pace of interest rate hike to be adopted by the ECB ahead.
• The BoE is expected to raise rates by 25 bps and then will hold for a year.

The EUR/GBP pair is consolidating above the round-level support of 0.8800 in the Asian session. The cross witnessed a steep fall on Wednesday after ditching crucial support of 0.8815 as investors are divided about the pace of interest rate hike to be adopted by the European Central Bank (ECB) ahead.

Earlier, the street was confident that ECB President Christine Lagarde will continue its policy-tightening regime by 50 basis points (bps).  Also, ECB member Isabel Schnabel cited last week that one more 50 bps interest rate hike is on the cards. Eurozone inflation is extremely persistent and is not showing confident signs of further softening due to labor shortage.

However, weak growth rates and declining bank credit have strengthened fears of a recession in the Eurozone and the ECB is expected to slow down the pace of hiking interest rates to 25 basis points (bps). In the first quarter, the Eurozone economy displayed a Gross Domestic Product (GDP) growth of 0.1% lower than the estimates of 0.2%.

Meanwhile, in a recently published Bank Lending Survey (BLS), the European Central Bank (ECB) noted that a net 38% of Eurozone banks reported a fall in demand for credit from companies in the first quarter of the year. Also, banks have tightened their credit conditions amid a volatile environment. ECB stated, "The general level of interest rates was reported to be the main driver of reduced loan demand, in an environment of monetary policy tightening."

On the Pound Sterling front, A survey of economists by Bloomberg showed most anticipate the key rate will rise to 4.5% on May 11 and then remain on hold, pausing the most aggressive cycle of increases in four decades.