The EUR/GBP currency pair edged lower to around 0.8440 during Thursday’s Asian session, reversing modest gains recorded over the previous three days. The Euro (EUR) softened against the Pound Sterling (GBP) ahead of the scheduled release of the Eurozone’s HCOB Purchasing Managers Index (PMI), which is expected to show accelerated business activity growth in May compared to April, potentially offering some support to the Euro.
Despite these positive forecasts, persistent dovish sentiment surrounding the European Central Bank’s (ECB) monetary policy is exerting downward pressure on the Euro. ECB officials remain confident that inflation is on track to return to the 2% target, fueling expectations of an interest rate cut in the central bank’s upcoming June policy meeting.
Meanwhile, the Pound gained momentum following the release of stronger-than-anticipated UK Consumer Price Index (CPI) figures for April. The UK Office for National Statistics reported a year-over-year CPI increase of 3.5%, surpassing the forecasted 3.3% and rising sharply from March’s 2.6%, marking the highest inflation rate since November 2023. Monthly inflation also surged to 1.2%, well above the estimated 1.1% and the previous 0.3%.
The surge in UK inflation raises the likelihood of the Bank of England (BoE) adopting a less accommodative stance, potentially curbing expansionary policies. Traders will also closely monitor the release of the S&P Global PMI data on Thursday for further cues on economic momentum in both regions.
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