EUR/GBP around 0.8560 after retreating from February high marked on Tuesday

• EUR/GBP stops its five-day winning streak on Wednesday.
• The British Pound strengthens following positive comments from Bank of England Governor Andrew Bailey.
• The Euro depreciates as the market adopts a cautious attitude due to the reduced prospects for early rate cuts globally.

The crossing EUR/GBP breaks its five-day winning streak and retreats to around 0.8560 during the European session on Wednesday. The Pound Sterling (GBP) strengthens against the Euro (EUR) following positive comments from Bank of England (BoE) Governor Andrew Bailey.

Governor Bailey and other policymakers testified before the UK Parliament on Tuesday. Bailey acknowledged that investors speculating on interest rate cuts this year are not unreasonable.. However, he emphasized indicators that suggest the British economy is recovering from a recession by the end of 2023. Bailey also noted that rate cuts could precede a fall in inflation below 2%, although he refrained to offer a precise calendar.

The deputy governor of the BoE, Ben Broadbent, highlighted that both wage growth and services inflation double the rate, aligning with sustainable inflation at 2%. Broadbent further stated that the focus has shifted from the scope of tight monetary policy to its duration, but that current data does not support rate cuts at the moment.

The crossing EUR/GBP is pressured by the difficulties facing the Euro, possibly derived from the markets' caution regarding the reduced prospects for early interest rate cuts on a global scale. However, China's decision to reduce its 5-year Prime Lending Rate by 25 basis points (bp) to strengthen its economy could offer some support to the Euro, given the close trade relations between China and the Eurozone.

Investors are bracing for potential volatility surrounding the upcoming release of U.S. data. Purchasing Managers' Index (PMI) for both the Eurozone and the United Kingdom, scheduled for Thursday. ECB President Christine Lagarde stressed the importance of wage data in determining the timing of monetary easing measures.