The EUR/GBP currency pair trimmed some of its recent gains to hover near 0.8435 during early European trading on Wednesday. The Pound Sterling (GBP) saw modest appreciation against the Euro (EUR) following the release of the UK’s Consumer Price Index (CPI) inflation figures for April. Later in the day, comments from European Central Bank (ECB) officials, including Luis De Guindos, Phillip Lane, and José Luis Escrivá, are awaited by the market.
Data from the UK Office for National Statistics revealed that headline CPI inflation rose 3.5% year-on-year (YoY) in April, up from 2.6% in March and surpassing the expected 3.3%. Core CPI, which excludes volatile food and energy prices, jumped to 3.8% YoY from 3.4%, also above forecasts of 3.6%. On a monthly basis, UK CPI inflation surged 1.2% in April compared to 0.3% in March, slightly beating the estimated 1.1% increase.
The stronger-than-anticipated inflation readings have spurred some immediate buying interest in the Pound Sterling.
Meanwhile, concerns about slowing Eurozone growth have prompted traders to increase their bets on the European Central Bank cutting interest rates further. ECB Governing Council member Klaas Knot indicated that a rate cut could be on the table for next month, though he cautioned that final decisions would depend on upcoming quarterly economic forecasts.
Markets currently price in nearly a 90% chance of an ECB rate cut at the June 5 meeting, but only one additional cut through the remainder of the year, according to Reuters. This outlook is likely to continue putting pressure on the Euro against the Pound in the short term.
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