EUR/GBP advances above the 0.8700 area, ECB rate decision looms

• EUR/GBP gains ground above the 0.8700 mark ahead of the European Central Bank (ECB) rate decision.
• Markets are pricing the ECB to hold the rate unchanged for the rest of the year.
• The downbeat UK economic data weigh on the GBP amid growing worries about a recession.
• ECB monetary policy meeting will be a closely watched event.

The EUR/GBP cross holds positive ground for the second consecutive day during the early European trading hours on Thursday. Investors will closely monitor the European Central Bank (ECB) interest rate decision later on Thursday, which is anticipated to hold the rate unchanged. The cross currently trades around 0.8726, gaining 0.02% on the day.

Markets are pricing ECB policy rates largely unchanged for the rest of the year, ending its hiking cycle. However, ECB President Lagarde is likely to signal a tightening bias compared to the Bank of England (BoE). This, in turn, might lift the Euro (EUR) against the Pound Sterling (GBP).

Furthermore, ECB President Lagarde said on Wednesday that the central bank will carefully monitor the unfolding crisis in the Middle East and the impact it may have on the eurozone economy.

On the other hand, the disappointing UK economic data exert pressure on the GBP. As reported by S&P Global, the Manufacturing PMI remains in the recessionary zone, while employment data shows that the labor market is easing. These figures might convince the BoE to maintain interest rates steady at 5.25% at its November 2 meeting amid growing worries about a recession.

Moving on, the ECB monetary policy meeting will be in the spotlight. Following the rate decision, the ECB Press Conference will be closely watched by traders. Market players will take cues from these events ahead of the BoE rate decision next week.