EUR/GBP Rebounds from 0.8400 on ECB-BOE Divergence

The EUR/GBP pair is reversing course from 0.8400, following a precipitous plunge from Monday's high of 0.8440. The pair has remained firmer in recent trading days, despite the European Central Bank's (ECB) President's speech at the International Monetary Fund (IMF) meeting adopting a dovish position.

The ECB's officials do not anticipate a rate hike until its Asset Purchase Program is completed (APP). The central bank has stressed the importance of lowering growth expectations in light of the Ukraine crisis and a large decline in household real income due to increasing energy costs and commodities prices. The circumstances need a stagflationary situation in the eurozone. Meanwhile, investors are focused on Wednesday's speech by ECB President Christine Lagarde. The speech will set the stage for the monetary policy narrative that will be dictated in the policy announcement.

Meanwhile, Bank of England (BOE) Governor Andrew Bailey rekindled fears of increasing inflation in the pound area during his testimony on Thursday. As per his directive, investors should begin bracing for a further increase in inflation, which might result in higher interest rates.

Although the ECB's Christine Lagarde's speech on Wednesday will be crucial, investors will also be focused on Thursday's eurozone Consumer Confidence report. Euro Consumer Confidence is -16.9, unchanged from its previous close.

EUR/GBP