EUR/GBP remains elevated above 0.8700 as markets await Eurozone HICP inflation figures

EUR/GBP Maintains Upward Momentum Amid UK Political Uncertainty

The EUR/GBP pair remains steady near 0.8725 in early Tuesday trading in Europe. The British Pound (GBP) is under pressure against the Euro (EUR), as political instability in the UK and rising speculation about a potential Bank of England (BoE) rate cut weigh on the currency. Later today, investors will focus on the initial release of the Harmonized Index of Consumer Prices (HICP) for the Eurozone.

Uncertainty within the UK government is putting downward pressure on the Pound. The Labour Party's significant by-election defeat in Gorton and Denton has sparked concerns over Prime Minister Keir Starmer's leadership.

Market participants are also paying close attention to the BoE's next moves regarding interest rates. Although BoE Governor Andrew Bailey has refrained from promising a rate cut in March, the Pound remains highly responsive to any hints of monetary policy easing. The central bank’s next policy decision is set for March 19.

Meanwhile, analysts generally anticipate that the European Central Bank (ECB) will keep interest rates unchanged until at least the middle of 2026. Nonetheless, the recent surge in oil prices has prompted some ECB officials to suggest the bank should remain flexible and ready to adjust rates if economic conditions become more volatile.

On Monday, ECB policymaker Martin Kocher emphasized that the central bank must be ready to act swiftly in either direction should new economic risks arise, signaling a move away from a fixed policy trajectory.