Euro remains subdued on dovish ECB mood

The EURGBP currency pair retraced its recent gains from the previous session, trading around 0.8330 during Monday’s Asian hours.

The Euro faces downward pressure as several European Central Bank officials remain comfortable with the outlook for three more rate cuts this year, following a 25 basis point reduction to 2.75% last month.

However, the downside for EURGBP may be limited, as the Euro could find support if a ceasefire in Ukraine is reached and gas supplies resume.

Reports indicate that US President Donald Trump and Russian President Vladimir Putin have agreed to begin negotiations to end the conflict, with Trump administration officials set to meet Russian counterparts in Saudi Arabia on Tuesday for talks on a potential peace deal.

Additionally, the EURGBP pair faces challenges following strong UK economic data released on Thursday.

The UK economy grew by 1.4% year-on-year in Q4 2024, accelerating from an upwardly revised 1.0% in the previous quarter and exceeding market expectations of 1.1%, according to preliminary estimates.

This marks the fastest GDP growth since Q4 2022. For the full year 2024, the British economy expanded by 0.9%, up from 0.4% in 2023, driven by a 1.3% increase in the services sector, compared to 0.4% growth the previous year.

Traders will be watching the upcoming UK labour market and Consumer Price Index (CPI) inflation data, due on Tuesday and Wednesday, respectively.

Both economic indicators will play a key role in shaping market speculation about whether the Bank of England will lower interest rates again at its March meeting. The BoE recently reduced its key borrowing rate by 25 bps to 4.5% on February 6.

(Source: OANDA)