Euro wavers around 0.8590 against British Pound with all eyes on the ECB

The Euro (EUR) has been hovering around 0.8580 to 0.8595 against the British Pound (GBP) on Thursday, within a narrow 15-pip range. Higher oil prices have prevented the Euro from making any significant gains, while its downward movements have been limited due to traders' aversion to placing large short positions ahead of the European Central Bank's (ECB) policy decision later in the day.

The ECB is expected to raise its benchmark interest rate by 25 basis points to 2.5%, with many investors anticipating a hawkish message from President Christine Lagarde, given the rising oil prices, which are expected to keep consumer prices above the bank's 2% target for an extended period. However, analysts from Commerzbank caution that "even if the ECB and its president, Christine Lagarde, were intent on delivering many interest rate hikes (which would already be ambitious), officials would certainly not want to commit to this today."

Commerzbank analysts believe the central bank will "wait and see how the situation in the Middle East develops and what further price pressures lie ahead," limiting the potential for bold forward guidance. Therefore, the risks are currently distributed asymmetrically: for a stronger Euro, the ECB would need to adopt a very hawkish stance, whereas for a weaker Euro, it only needs to disappoint market-advanced expectations.