EUR/GBP trades around 0.8560 after retreating from February’s high marked on Tuesday

• EUR/GBP halts its five-day winning streak on Wednesday.
• The Pound Sterling strengthens from the positive comments of BoE Governor Andrew Bailey.
• The Euro depreciates as the market adopts caution due to reduced prospects for early rate cuts globally.

EUR/GBP snaps its five-day winning streak, edging lower to near 0.8560 during the Asian session on Wednesday. The Pound Sterling (GBP) strengthens against the Euro (EUR) on the back of positive comments from the Bank of England (BoE) Governor Andrew Bailey.

Governor Bailey and other policymakers testified before the United Kingdom Parliament on Tuesday. Bailey acknowledged that investors speculating on interest rate cuts this year are not unreasonable. However, he emphasized indicators suggesting that the British economy was rebounding following a recession in late 2023. Bailey also noted that rate cuts could precede inflation dropping below 2%, though he refrained from providing a precise timeline.

BoE Deputy Governor Ben Broadbent highlighted that wage growth and services inflation are both double the rate, aligning with sustainable inflation at 2%. Broadbent further stated that the focus has shifted from the extent of restrictive monetary policy to its duration, but current data does not support rate cuts at this stage.

The EUR/GBP cross receives pressure as the Euro faces challenges, possibly stemming from market caution amid reduced prospects for early interest rate cuts globally. Nonetheless, China's move to decrease its five-year Loan Prime Rate (LPR) by 25 basis points (bps) to bolster its economy could offer some backing to the Euro, given the close trade relations between China and the Eurozone.

Traders are bracing for potential volatility surrounding the forthcoming release of Purchasing Managers Index (PMI) data from both the Eurozone and the United Kingdom, set for Thursday. ECB President Christine Lagarde emphasized the significance of wage data in determining the timing of monetary easing measures.