EUR/GBP remains subdued near 0.8350 due to dovish sentiment surrounding ECB policy stance

• EUR/GBP faces challenges as traders expect the ECB to deliver a rate cut in December.
• The European Commission forecasts 0.8% growth for the Euro Area in 2024, maintaining its projection from the Spring estimate.
• UK Economist Ruth Gregory expects that the BoE will hold interest rates steady at 4.75% in December.

EUR/GBP remains stable near 0.8350 during early European trading hours on Monday. The EUR/GBP cross faces headwinds as the Euro remains under pressure due to the European Central Bank’s (ECB) dovish outlook, with a policy rate cut anticipated at its December meeting.

In its Autumn 2024 forecast, the European Commission predicts 0.8% growth for the Euro Area in 2024, unchanged from its Spring estimate. However, the growth projection for 2025 has been slightly lowered to 1.3% from 1.4%, while the Eurozone economy is expected to expand by 1.6% in 2026.

Commenting on the outlook, EU Economy Commissioner Paolo Gentiloni remarked, “As inflation continues to ease and growth in private consumption and investment gains momentum, coupled with record-low unemployment, growth is expected to gradually accelerate over the next two years.”

The UK economy expanded by 0.1% quarter-on-quarter in the three months ending September, slowing from the 0.5% growth seen in Q2 and missing market expectations of a 0.2% increase. Year-on-year, UK GDP grew by 1.0% in Q3, aligning with forecasts and improving on the 0.7% growth recorded in Q2. On a monthly basis, GDP contracted by 0.1% in September, reversing a 0.2% gain in August.

Capital Economics’ Deputy Chief UK Economist Ruth Gregory reiterated their expectation that the Bank of England (BoE) will maintain rates at 4.75% in December, with a 25-basis-point rate cut anticipated in February.