EUR/GBP rises to near 0.8400, upside seems limited due to BoE's cautious tone

• EUR/GBP may weaken as the BoE cautioned against expectations of rate cuts and raised its inflation forecast.
• GfK Consumer Confidence rose by one point to -19 in March, marking its second consecutive monthly increase from -20 in February.
• ECB President Christine Lagarde highlighted economic risks from potential US tariffs.

EUR/GBP gains ground on Friday after losses in the previous session, hovering around 0.8380 during early European trading. However, the currency pair could face headwinds as the Pound Sterling (GBP) strengthens following the Bank of England's (BoE) cautious stance on rate cuts and its revised inflation peak forecast for the year.

On Thursday, the BoE maintained interest rates at 4.5% as expected, with eight out of nine Monetary Policy Committee (MPC) members voting to keep borrowing costs unchanged. One member supported a 25 basis-point (bps) rate cut, fewer than the two anticipated by market participants.

In the UK, GfK Consumer Confidence inched up by one point to -19 in March 2025, marking a second consecutive monthly increase from -22 in January and -20 in February. The figure surpassed market expectations of -21 but remained in negative territory, highlighting ongoing consumer caution.

Meanwhile, the Euro (EUR) remains under pressure after European Central Bank (ECB) President Christine Lagarde warned of economic risks stemming from potential US tariffs. Speaking before the European Parliament's Committee on Economic and Monetary Affairs, Lagarde noted that a 25% tariff on European imports--threatened by US President Donald Trump--could reduce Eurozone growth by approximately 0.3% in its first year.

Additionally, ECB policymakers have signaled the possibility of rate cuts in 2025, citing increasing risks from global trade tensions. Investors now turn their attention to upcoming Eurozone data, including January's current account balance and March's consumer confidence figures due on Friday.