EUR/GBP recovers the 0.8550 level

• EUR/GBP rebounds from 0.8500 following comments from ECB's Christine Lagarde that the fight against inflation is not over yet.
• ECB's Klaas Knot is unfazed by market expectations of rate cuts.
• Investors await UK retail sales data.

The EUR/GBP pair extends its recovery to 0.8550 in the American session on Thursday. The cross recovered after discovering strong buying interest near the psychological support of 0.8500. The Euro strengthened against the British Pound after comments from ECB President Christine Lagarde raised doubts over whether the central bank will actually move on to cutting rates from the June meeting.

On Wednesday, the ECB's Lagarde commented: “Growth in Europe is mediocre, much slower than in the US.” Lagarde warned that the fight against inflation is not over. Unlike Lagarde, ECB Governing Council member Klaas Knot declared at Thursday's European session that he is not bothered by the market's assessment of the ECB's rate cuts. Knot added that he is “increasingly confident in the disinflation process.”

On the other hand, the head of monetary policy at the ECB, Joachim Nagel, stated that he cannot rule out small increases in inflation in Germany in some months of this year.

Meanwhile, traders have reassessed speculation about a rate cut by the Bank of England (BoE), as March Consumer Price Index (CPI) data softened at a slower pace than estimated. Investors expect the BoE to cut interest rates just once this year, instead of three. Furthermore, the BoE is expected to choose the November meeting to start reducing interest rates.

Looking ahead, the British pound will be guided by UK retail sales data for March, due to be released on Friday. It is estimated that monthly retail sales would have grown by 0.3% after remaining stagnant in February.