EUR/GBP Stays Steady After UK Inflation Data

• EUR/GBP saw some upward movement on Wednesday but failed to maintain momentum.
• The initial market reaction to softer UK inflation figures quickly faded.
• Traders are eagerly awaiting the Bank of England (BoE) meeting on Thursday before making significant trading decisions.
• On Wednesday, the EUR/GBP pair attracted some buyers and reached a new daily high around the 0.8555-0.8560 range following the release of UK consumer inflation data.
• However, the price movement was limited, and the pair remained within a familiar trading range that has persisted since the beginning of the month.

According to the UK Office for National Statistics (ONS), the headline CPI increased by 0.6% in February, compared to a 0.6% decline in the previous month and consensus estimates. However, the yearly rate slowed more than expected, dropping from 4.0% in January to 3.4% in February – its lowest level since September 2021.

Additionally, the Core CPI fell from a year-on-year rate of 5.1% to 4.5% in February, missing expectations. With the UK experiencing a technical recession in the fourth quarter, speculation grows about an early rate cut by the Bank of England (BoE). This sentiment weighs on the British Pound (GBP) and provides some support to the EUR/GBP pair.

Despite UK inflation still being significantly above the BoE’s 2.0% target, this helps limit losses for the GBP. However, the Euro remains under pressure due to expectations that the European Central Bank (ECB) may begin cutting interest rates in June. This contributes to keeping gains for the EUR/GBP pair in check.

Furthermore, traders appear hesitant to make aggressive trading decisions and prefer to wait on the sidelines ahead of the BoE policy meeting on Thursday. Therefore, it would be wise to wait for a sustained breakout from the short-term trading range before considering further trading opportunities beyond the recent rebound from the psychological level of 0.8500.

EUR/GBP