EUR/GBP holds positive ground 0.8550 ahead of Eurozone inflation data


content provided with permission by FXStreet

  • EUR/GBP gains ground near 0.8565 in Wednesday’s early European session. 
  • BoE’s Bailey said UK economy is moving towards the point where the central bank can begin cutting rates.
  • ECB’s Holzmann said he has ‘no in-principle objection’ to a June rate cut, but wants to see more supportive data.
  • The preliminary Eurozone HICP inflation data for March will be in the spotlight on Wednesday. 

The EUR/GBP cross trades in positive territory for the fourth consecutive day around 0.8565 on Wednesday. The rising expectation that the Bank of England (BoE) will lower its borrowing cost in June exerts some selling pressure on the Pound Sterling (GBP).

The BoE Governor Andrew Bailey said in recent weeks that, due to further encouraging signs that inflation is cooling, the UK economy is moving towards the point where the central bank can begin cutting interest rates. Meanwhile, BoE interest-rate setter Jonathan Haskel said rate cuts should be “a long way off, although the fall in headline inflation is very good news. Jeremy Hunt, Chancellor of the Exchequer, stated that as inflation gets closer to its target that opens the door for the BoE to consider lowering interest rates. 

On the Euro front, the European Central Bank (ECB) policymaker Robert Holzmann said on Wednesday that he has ‘no in-principle objection’ to a June rate cut, but wants to see more supportive data before the central bank could start cutting interest rates. The ECB’s policymaker Yannis Stournaras said on the weekend that the ECB could possibly cut rates by a total of 100 basis points this year, but there was still no consensus within the Eurozone’s central bank on that. 

ING economist, Carsten Brzeski, said that wage developments remain key and as long as the economy doesn’t fall off a cliff, the ECB will remain restrictive on policy and wait for more evidence on data. The less dovish stance of the ECB might lift the Euro (EUR) against the GBP and create a tailwind for the EUR/GBP cross. 

Later on Wednesday, the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for March will be released. In case the report shows the easing inflation in the Euro area in March, this could bolster hopes that the ECB will soon start cutting interest rates and weigh on the EUR.