EUR/GBP lacks firm intraday direction, stuck in a range below 0.8400 mark

• EUR/GBP consolidates as traders opt to wait on the sidelines ahead of the BoE on Thursday.
• Bets that the BoE will cut rates slowly underpin the GBP and act as a headwind for the cross.
• Diminishing odds for more aggressive ECB rate cuts lend support to the Euro and spot prices.

The EUR/GBP cross struggles to gain any meaningful traction and oscillates in a narrow trading band below the 0.8400 round-figure mark through the first half of the European session on Tuesday. Investors seem reluctant to place aggressive directional bets and opt to wait on the sidelines ahead of the pivotal Bank of England (BoE) policy decision on Thursday.

The UK central bank is widely expected to focus on a longer-term picture of slowing inflation and vote to cut interest rates for the second time this year. That said, expectations that UK Finance Minister Rachel Reeves’ first budget would boost inflation and cause the BoE to cut interest rates more slowly turn out to be a key factor acting as a headwind for the EUR/GBP cross. The downside, however, remains cushioned in the wake of bets for a less dovish European Central Bank (ECB). 

Data released last week showed that inflation in the Eurozone rose to 2% in October. Furthermore, the better-than-expected GDP growth figures from the Eurozone’s largest economies suggest that the ECB will stick to a 25 basis points (bps) interest rate cut at its next policy meeting in December. This, in turn, continues to underpin the shared currency and fails to assist the EUR/GBP cross to build on last week’s breakout momentum beyond the 50-day Simple Moving Average (SMA). 

Investors also prefer to wait on the sidelines amid the uncertainty surrounding the US presidential election and ahead of ECB President Christine Lagarde’s speech on Wednesday. Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the EUR/GBP pair’s recent bounce from sub-0.8300 levels.