EUR/GBP drifts higher to above 0.8650 amid optimism over potential US-Russia meeting 

• EUR/GBP gains ground to around 0.8665 in Monday's early European session. 
• Potential meeting between the US and Russia underpins the Euro. 
• The BoE signaled a cautious easing path, which might help limit the GBP's losses. 

The EUR/GBP cross edges higher to near 0.8665 during the early European session on Monday. The Euro (EUR) gains ground against the Pound Sterling (GBP) amid optimism surrounding a possible meeting between the US and Russia. However, the upside for the cross might be capped due to a hawkish rate cut by the Bank of England (BoE). 

The EUR's appeal has risen from expectations an increase in regional defense spending will support the Eurozone economy. Additionally, potential talks between US President Donald Trump and Russian President Vladimir Putin in Alaska on Friday to end sanctions contributes to the EUR's upside. Kremlin aide Yuri Ushakov said on Thursday that Trump and Putin would meet in the coming days in what would be the first summit between leaders of the two countries since 2021.

The BoE decided to cut the interest rates from 4.25% to 4.0% at its August meeting on Thursday as the UK central bank resumed what it describes as a "gradual and careful" approach to monetary easing. Four of its nine policymakers sought to keep borrowing costs steady, suggesting the BoE's run of rate cuts might be nearing an end. 

Hawkish rate cuts from the BoE could underpin the GBP and act as a headwind for the cross in the near term. Traders trimmed their bets on the chance of another BoE rate reduction by the end of 2025 and were only fully pricing in a cut to 3.75% in February next year, according to data from LSEG.