EUR/GBP holds above 0.8300 on BoE dovish bets

• EUR/GBP holds positive ground to near 0.8305 in Monday’s early European session. 
• Traders interpreted the BoE's decision as a dovish hold, undermining the GBP.
• ECB’s Lagarde said the Eurozone was getting "very close" to reaching the medium-term inflation target. 

The EUR/GBP cross extends the rally to around 0.8305 during the early European session on Monday. The dovish bets for the Bank of England (BoE) weigh on the Pound Sterling (GBP) and create a tailwind for EUR/GBP. Traders price in a 53 basis points (bps) interest rate reduction by the UK central bank in 2025 after the policy announcement.

The Bank of England's (BoE) split vote decision to leave interest rates unchanged at 4.75% last week and a dovish hold dragged the GBP lower against the shared currency. BoE policymakers highlighted external risks, including uncertainty over geopolitical tensions and potential Donald Trump tariff threats. "With the heightened uncertainty in the economy, we can't commit to when or by how much we will cut rates in the coming year,” said BoE Governor Andrew Bailey.

On the Euro front, the European Central Bank (ECB) President Christine Lagarde said the Eurozone was getting "very close" to reaching the ECB's medium-term inflation target, per the Financial Times on Monday. Lagarde further stated that the central bank would cut interest rates further if inflation continued to ease towards its 2% goal, as curbing growth was no longer necessary.

ECB policymakers have become worried about growing economic risks due to weak demand and US President-elect Donald Trump's potential tariff threats. The ECB will hold its first rate-setting meeting of 2025 on January 30. Investors envisage a slightly more aggressive path of the ECB easing cycle next year, which might weigh on the Euro against the GBP.