EUR/GBP tumbles to near 0.8550 ahead of Eurozone/UK PMI data

• EUR/GBP weakens to around 0.8550 in Wednesday's early European session. 
• The ECB's dovish bets weigh on the shared currency. 
• The US will aim for the UK to lower its automotive tariff and relax rules on agricultural imports.

The EUR/GBP cross trades in the negative territory near 0.8550 during the early European session on Wednesday. The dovish stance of the European Central Bank (ECB) weighs on the Euro (EUR) against the Pound Sterling. All eyes will be on the preliminary readings of the April Purchasing Managers Index (PMI) from the UK and the Eurozone, which will be released later on Wednesday. 

The rising bets that the ECB could cut interest rates again in the June policy meeting weigh on the shared currency. After policymakers agreed unanimously to cut the benchmark rate by 25 basis points (bps) to 2.25% last week, ECB President Christine Lagarde said that downside risks to economic growth have increased. According to LSEG data, traders are now pricing in nearly a 75% odds of a June rate cut, up from roughly 60% before the ECB's decision. 

Meanwhile, ECB policymaker Francois Villeroy de Galhau said on Tuesday that US President Donald Trump's trade tirades dampen economic growth, including for the US, and threaten to undermine financial stability.

On the GBP's front, the positive developments surrounding US-UK trade talks provide some support to the GBP. The Wall Street Journal reported late Tuesday that the Trump administration is preparing its terms for trade talks with the UK, aiming for London to reduce levies and other non-tariff barriers on a wide range of US goods. 

The US will aim for the UK to reduce its automotive tariff from 10% to 2.5% and will also push the UK to relax rules on agricultural imports from the US, including beef, and revise rules of origin for goods from each nation, according to people with knowledge. However, any signs of uncertainty in trade policy could weigh on the GBP.