EUR/GBP remains on the defensive near 0.8300 ahead of BoE rate decision

• EUR/GBP remains under selling pressure around 0.8315 in Thursday’s early European session.
• The UK central bank is likely to cut the benchmark rate by 25 bps at its November meeting on Thursday. 
• German Industrial Production came in at -2.5% MoM in September vs. -1.0% expected. 

The EUR/GBP cross extends its downside to near 0.8315 on Tuesday during the early European session. The Bank of England (BoE) interest rate decision will be in the spotlight on Thursday. 

The BoE is widely expected to cut interest rates on Thursday, bringing the benchmark rate to 4.75% from 5.0%. Political developments will influence the central bank's decision on Thursday, particularly last week's Budget given by Chancellor Rachel Reeves. The UK officials stated that they would push inflation and interest rates higher in the short term, triggering more doubt about whether the UK central bank will cut interest rates again following its meeting in December.

The expectation that the BoE would cut rates less aggressively than the European Central Bank (ECB) could provide some support to the Pound Sterling (GBP) and cap the upside for the cross in the near term. 

The ECB has already reduced rates three times this year as inflation risks in the Eurozone ease faster than expected. The rising ECB rate cut bets exert some selling pressure on the shared currency. Money markets see the ECB cut rates by around 125 basis points (bps) over the next year.

Data released by Destatis on Thursday showed that Germany’s industrial sector activity declined by 2.5% MoM in September versus a rise of 2.6% (revised from 2.9%) in August, weaker than the estimation of 1.0% decline. The Euro remains weak in an immediate reaction to the downbeat Industrial Production data.