EUR/GBP jumps above 0.8350 after BoE’s Bailey speech

• EUR/GBP gains traction to around 0.8380 in Thursday’s early European session, up 0.65% on the day. 
• BoE’s Bailey said the UK central bank may become a bit more aggressive on rate cuts. 
• Traders anticipate the ECB to cut the interest rates in October. 

The EUR/GBP cross rebounds to near 0.8380 during the early European session on Thursday. The Pound Sterling (GBP) loses ground after Bank of England (BoE) Governor Andrew Bailey’s speech. 

On Thursday, the BoE’s Bailey said that the UK central bank could become a “bit more aggressive” and “more activist” on rate reduction if there’s further progress on inflation. Bailey further stated that he will closely monitor the Middle East developments. The dovish remarks from Bailey exert some selling pressure on the GBP and create a tailwind for EUR/GBP. 

The BoE held interest rates at 5.0% in the September meeting after the first cut in borrowing rates in four years in August. However, investors expect another quarter-point reduction at its November meeting.

The European Central Bank (ECB) president Christine Lagarde reiterated last month that the central bank was “not pre-committing” to additional rates cut, emphasizing that the policymakers will stick to their “data-dependent. The recent Eurozone economic data earlier this week triggers the chance of the ECB rate cuts. The Eurozone inflation fell to 1.8% in September, below the 2% target.  

ECB Governing Council member Kazaks stated that “recent data clearly point in the direction of a cut, but leaned against “exaggerated” market expectations for easing. The markets have priced in nearly 95% odds of an October cut, up from a 25% chance after the September ECB decision.

Investors await the HCOB September Purchasing Managers’ Index (PMI) from Germany and the Eurozone, along with the Producer Price Index (PPI), which is due on Thursday. If the report shows a weaker-than-expected outcome, this could drag the shared currency lower against the GBP.