The Euro (EUR) is trading slightly higher against the British Pound (GBP) on Thursday, holding above the 0.8650 level. However, the pair remains range-bound as weak German economic data offsets the support coming from hawkish European Central Bank (ECB) commentary.
Bundesbank President Joachim Nagel stated that a rate hike in April could be considered at the upcoming ECB meeting if tensions in the Middle East trigger a fresh surge in inflation across the Eurozone. His remarks reinforced expectations of tighter monetary policy.
These comments follow ECB President Christine Lagarde’s statement on Wednesday, where she stressed that the central bank would act firmly and persistently if inflation stays well above the 2% target.
Despite this, concerns about slower economic growth are limiting gains in the Euro. Germany’s GfK Consumer Confidence Index is expected to drop further to -28 in April from -24.8 in March. Additionally, the IFO Business Climate Index weakened, and PMI data highlighted rising energy costs as a risk to the fragile economic recovery.
Meanwhile, the British Pound is also struggling to gain strength, keeping EUR/GBP in a sideways trend. UK inflation remains elevated at 3%, increasing expectations that the Bank of England may need to raise interest rates multiple times this year.
