EUR/GBP holds losses near 0.8300 following German Consumer Confidence Survey

• EUR/GBP remains under pressure as Germany’s GfK Consumer Confidence Survey dropped to -24.7 going into March. 
• The Euro may face further headwinds with the ECB widely expected to cut interest rates next week. 
• UK Prime Minister Keir Starmer has announced plans to raise defense spending to 3% of the country’s economic output.

EUR/GBP posts losses after registering gains in the previous two successive days, trading around 0.8300 during the early European hours on Wednesday. The currency cross holds losses following the release of Germany’s GfK Consumer Confidence Survey, which fell to -24.7 heading into March 2025, down from a slightly revised -22.6 in the prior period and below market expectations of -21.4. This represents the lowest level since April 2024, highlighting ongoing challenges for the new government, such as persistent cost pressures, political uncertainty, and a surge in corporate bankruptcies.

Traders closely monitor remarks from European Central Bank (ECB) officials ahead of next week’s policy meeting, where the ECB is widely expected to cut interest rates for the fifth consecutive time.

On Tuesday, ECB board member Isabel Schnabel argued that subdued growth should not be automatically interpreted as evidence of restrictive policy, according to a report from Reuters. Schnabel noted that "the natural rate of interest in the Euro area has increased appreciably over the past two years" and suggested that "the nature of the inflation process is likely to have changed lastingly."

ECB policymaker Martins Kazaks expressed support for continued rate cuts, emphasizing the need to approach them step by step. Meanwhile, ECB’s Joachim Nagel indicated that further rate cuts remain possible if inflation continues to ease toward the 2% target.

In the United Kingdom (UK), Prime Minister Keir Starmer has unveiled plans for a significant boost in defense spending, aiming to increase it to 3% of the nation’s economic output over the next decade, according to Bloomberg. This move comes as European governments work to strengthen their security amid uncertainty over US support under Donald Trump’s leadership.

Addressing the House of Commons on Tuesday, Starmer described the initiative as “the biggest sustained increase in defense spending since the end of the Cold War.” Ahead of his upcoming visit to Washington later this week, he confirmed that the initial funding for this increase would come from cuts to overseas development spending, with no plans to raise taxes or increase borrowing.