EUR/GBP extends gains above 0.8600, focus on Fed and BoE decisions

• EUR/GBP remains above 0.8600 awaiting central bank decisions.
• The Euro strengthened following ECB President Christine Lagarde’s hawkish comments.
• The BoE is expected to raise interest rates by 25 basis points on Thursday.
• BoE Governor Andrew Bailey indicated that the end of the interest rate hike cycle is near.

The EUR/GBP cross attempts to extend its gains for the second day in a row, trading higher around 0.8610 during the European session on Monday. The pair could gain strength after statements made on Friday by the president of the European Central Bank (ECB), Christine Lagarde.

Lagarde stated that ECB policymakers had not considered further rate cuts. The ECB president also suggested that the central bank’s intention was to keep interest rates at high levels for an extended period and that it was willing to raise them if she deemed it necessary.

Commerzbank economists have analyzed the outlook for the euro (EUR) following last week’s ECB rate hike. According to their analysis, the central bank’s decision to signal an end to rate hikes for the time being was largely in line with market expectations. However, this move by the ECB carries a certain level of risk, as it signals a potentially less aggressive monetary policy stance.

On the other hand, sterling traders anticipate that the Bank of England (BoE) will raise interest rates by 25 basis points at the next meeting scheduled for Thursday. This potential rate hike by the BoE reflects the central bank’s efforts to address inflationary pressures and stabilize the British economy.

However, BoE Governor Andrew Bailey has indicated that the central bank is getting closer to ending its series of interest rate hikes. This statement, coupled with concerns about a possible recession and signs of a cooling in the British labor market, may increase pressure on the BoE to end its cycle of rate hikes.

For the week, important events are planned in the Eurozone. The Harmonized Consumer Price Index (HICP) for the euro zone for the month of August will be published on Tuesday, and the preliminary composite PMI for September will be published on Friday. This data could shed light on inflation trends in the Eurozone bloc, which could provide support for EUR/GBP traders.