EUR/GBP rises near 0.8350 following upbeat speech from BoE Governor Bailey

• EUR/GBP snaps four-day losing streak on dovish comments from BoE Governor Andrew Bailey.
• The BoE’s Bailey believes the outlook for inflation is down, suggesting the path for interest rates will also be on a gradual downward path.
• Germany’s business climate index fell to 85.4 in September from 86.6 in August and expected 86.0.

EUR/GBP snaps its four-day losing streak, trading around 0.8330 during European hours on Tuesday. This upside to the EUR/GBP cross could be attributed to dovish comments from Bank of England (BoE) Governor Andrew Bailey.

BoE Governor Andrew Bailey said: “I’m very encouraged that the path of inflation is down, so I think the path of interest rates will be down, gradually.” Bailey added: “My best guess will be that interest rates will settle at a ‘neutral rate.’

British Prime Minister Keir Starmer is expected to warn of a “common struggle” ahead, but will stress there is “light at the end of the tunnel” for the country during his first speech at the Labor Party conference. Starmer will say that “tough” decisions are now needed to “build a new Britain”, according to the BBC.

On the data front, Germany’s IFO business climate index fell to 85.4 in September, down from 86.6 in August, missing market expectations of 86.0. The current economic assessment index also fell to 84.4, below the forecast level of 86.1, compared to 86.4 in the previous month. Meanwhile, the IFO expectations index, which reflects firms’ outlook for the next six months, fell to 86.3 in September, in line with expectations, from 86.8 in August.

Monday’s flash HCOB purchasing managers’ index (PMI) data for September from the euro zone and Germany boosted market expectations that the European Central Bank (ECB) could implement a second consecutive interest rate cut at its October meeting.