EUR/GBP Holds Firm Above 0.8400 Ahead of German Spending Plan Vote

• EUR/GBP remains steady ahead of Tuesday’s crucial German spending plan vote.
• CDU/CSU bloc, led by Friedrich Merz, is expected to secure a two-thirds parliamentary majority.
• Bank of England (BoE) is set to hold rates steady, balancing economic slowdown with inflation risks.

EUR/GBP Steady as Traders Await German Fiscal Reforms

The EUR/GBP currency pair remains stable for the second consecutive session, trading around 0.8410 during the Asian session on Tuesday. Investors are closely monitoring Germany’s critical spending plan vote, which could impact the Euro’s trajectory.

The CDU/CSU bloc, led by election winner Friedrich Merz, is widely expected to secure the two-thirds parliamentary majority needed to pass fiscal reforms. The proposed plan includes:

• Exempting defense spending from Germany’s constitutional debt limits.
• A massive €500 billion infrastructure investment fund to drive long-term growth.

This spending initiative is expected to pass through both houses of Parliament, providing a boost to investor sentiment.

ECB Rate Cut Expectations Adjusted, Supporting the Euro

Traders have revised their expectations for European Central Bank (ECB) rate cuts this year, now pricing in only two reductions—likely in April and June—with no expectations of rates falling below 2%. This recalibration has helped stabilize the Euro against the Pound.

Pound Sterling Strengthens Ahead of BoE Policy Decision

The British Pound (GBP) remains firm as markets anticipate the Bank of England (BoE) will keep interest rates steady at Thursday’s policy meeting. The BoE’s cautious stance aims to balance the UK’s sluggish economic growth with persistent inflation concerns.

Key factors affecting the BoE’s outlook:

• In February, the central bank lowered interest rates to 4.5% while downgrading its 2025 GDP growth forecast to 0.75% due to global trade uncertainties and fiscal pressures.
• Investors will focus on BoE Governor Andrew Bailey’s statement for insights into future monetary policy direction.

With both the Euro and Pound maintaining stability, the EUR/GBP pair is likely to trade in a narrow range until further clarity emerges from these key economic events.

Market Outlook: What to Watch Next

1. German spending plan vote outcome – A successful passage could strengthen the Euro.
2. ECB rate decision expectations – Traders are now pricing in only two cuts in 2025.
3. Bank of England’s stance on inflation and growth – Governor Bailey’s comments could influence GBP momentum for the remainder of the week.

EUR/GBP Technical Levels to Watch

• Key resistance: 0.8440 – A breakout could signal further Euro strength.
• Immediate support: 0.8380 – A break below could favor the Pound.

Traders will closely monitor fundamental developments and central bank signals to determine the next directional move for EUR/GBP.

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