- EUR/GBP comes under some selling pressure following the release of UK inflation figures.
- The increase in the CPI in the United Kingdom reaffirms expectations of further rate hikes by the Bank of England, which boosts the pound sterling.
- Expectations of a lower rate hike from the ECB contribute to the low profitability of the Euro and exert pressure on the pair.
The crossing EUR/GBP finds new selling during the early hours of the European session on Wednesday and falls to a new weekly low, around the 0.8810 zonein reaction to stronger UK consumer inflation figures.
Sterling strengthened slightly after the UK’s Office for National Statistics (ONS) reported that the UK headline CPI had declined less than expected, to a year-on-year rate of 10.1% in March, compared to 10.4% registered the previous month. Additionally, the core CPI, which excludes food and energy price volatility, held steady at 6.2% yoy during the reported month, beating expectations for a drop to 6.0%. This comes on the heels of UK wage growth data on Tuesday and should keep pressure on the Bank of England (BoE) to raise interest rateswhich in turn drags the EUR/GBP cross lower.
The relative underperformance of the common currency could also be attributed to the fact that the policy makers of the European Central Bank (ECB) have left the door open to a reduction in the rate of interest rate rises. Indeed, Martins Kazaks, a member of the ECB, said on Monday that the central bank could opt for a 25 basis point hike at the next meeting in May. This helps soften the tone of the EUR/GBP cross. That being said, the lack of strong follow through on selling warrants some caution on the part of aggressive bears before positioning for any further intraday bearish moves, at least for now.
Market participants now await the publication of the Final CPI for the Eurozone, which could influence the Euro and give EUR/GBP some momentum. In addition, operators will follow the Bank of England Quarterly Bulletin for the central bank’s view of the state of the UK economy. This could help generate short-term opportunities ahead of the speech by Catherine Mann, a member of the Bank of England’s Monetary Policy Committee.
EUR/GBP technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
