EUR Flat As ECB Leaves Rates Unch; Cable Drops On BoE's 'Dovish Hold'

The Bank of England's near-rate cut decision, a 5-4 vote, surprised markets, with Bailey as the deciding vote to hold rates at 3.75%. Bailey suggested further rate cuts this year, indicating a dovish stance that revived rate-cut hopes for the near future. The BoE's monetary policy report assessed the impact of November's budget, predicting short-term economic boosts but long-term slowdown due to tax increases. When questioned, Bailey dismissed the possibility of rate hikes, solidifying expectations for future cuts. This dovish stance pushed the British pound and gilt yields lower. The commentary and narrow vote further increased expectations for rate cuts in 2026. The ECB, as expected, maintained its rates and reiterated its data-dependent approach to policy. The ECB emphasized its decisions depend on inflation outlook, economic data, and transmission dynamics. The ECB saw economic resilience despite global uncertainties, supported by factors like low unemployment and public spending. The ECB's commentary was more measured than the BoE's, suggesting less market impact on European bond yields.