EUR/GBP retreats from highs as Sterling firms on profit-taking, BoE comments

• EUR/GBP is under Pressure after hitting fresh year-to-date highs near 0.8865 on Friday.
• Sterling firms despite a quiet UK calendar, supported by light profit-taking on recent Euro gains.
• BoE's Mann flags persistent upside inflation risks, offering mild support to the Pound.

The Euro weakens against the British Pound on Monday, with EUR/GBP extending its pullback after climbing to fresh year-to-date highs near 0.8865 on Friday, as traders react to contrasting signals from the European Central Bank (ECB) and the Bank of England (BoE).

At the time of writing, the cross is trading around 0.8806, with no fresh economic releases on either side. Sterling is firmer on the day, helped by light profit-taking on the recent Euro rally amid lingering uncertainty ahead of the UK's November 26 budget.

Sterling also found a mild lift from hawkish-leaning remarks by Bank of England policymaker Catherine Mann earlier in the day. Mann warned that the UK is operating in "a more shock-ridden environment," saying recent shocks continue to give "an upward bias to inflation."

She noted that firms are "continuing to factor in inflation into pricing," adding that underlying inflation dynamics show "upside risk." While she acknowledged that wage normalization is underway, Mann said central banks will still "have to lean against upward bias."

On the Euro side, ECB commentary offered little support to the Euro. Vice-President Luis de Guindos said he expects inflation "to converge towards the target," and noted that wage dynamics are "going in the right direction," while highlighting that the Eurozone's fiscal challenge remains "a key vulnerability."

In separate remarks, ECB's Sleijpen said inflation risks for the Euro Area are "balanced," reiterating that current data show the economy is "in a good place" and that monetary policy is also "in a good place."

Beyond central-bank remarks, the European Commission's latest projections pointed to a mixed growth path for the bloc. The EU now expects Eurozone Gross Domestic Product (GDP) to rise 1.3% in 2025, an upgrade from the previous 0.9% estimate, but lowered its 2026 forecast to 1.2% from 1.4%, with growth seen at 1.4% in 2027. Germany's 2026 outlook was nudged slightly higher to 1.2% from 1.1%, while the Eurozone budget deficit is projected at 3.2% in 2025 and widening to 3.4% by 2027.

Looking ahead, attention turns to the upcoming inflation releases, with the UK Consumer Price Index (CPI) and the Eurozone Harmonised Index of Consumer Prices (HICP) due on Wednesday.