EUR/GBP trades with mild losses near 0.8450 on ECB dovish expectations

• EUR/GBP trades in negative territory around 0.8450 in Thursday's early European session. 
• The rising expectation of an ECB further rate cut drags the Euro lower. 
• Markets expect one or two more rate reductions from the BOE after February. 

The EUR/GBP cross softens to near 0.8450 during the early European trading hours on Thursday. The dovish stance of the European Central Bank (ECB) policymakers weighs on the Euro (EUR) against the Pound Sterling (GBP). The preliminary reading of Eurozone Consumer Confidence for January will be released later on Thursday. 

ECB President Christine Lagarde, along with policymaking council members Francois Villeroy de Galhau, Klaas Knot, and Yannis Stournaras, all supported further rate reductions. This, in turn, could undermine the shared currency in the near term. Investors have fully priced a cut in the 3.0% deposit rate on January 30 and expect the benchmark to lower to 2.0% by the end of the year.

ECB Croatian central bank chief Boris Vujcic said earlier this week that market expectations for European Central Bank interest rate cuts are reasonable and risks around the inflation outlook are broadly balanced. Meanwhile, ECB President Christine Lagarde emphasized on Wednesday that the central bank is "not overly concerned" about the risk of inflation from abroad and will continue to reduce interest rates at a gradual pace. 

On the GBP's front, investors anticipate the Bank of England (BoE) to cut its main interest rate by 25 basis points (bps) to 4.5% on February 6, and economists polled by Reuters expect three additional cuts this year, while markets expect one or two more after February. "We still think the Bank of England will cut interest rates at the next meeting in February, from 4.75% to 4.50%, and continue to cut rates gradually thereafter," noted Capital Economics analysts.