The EUR/GBP currency pair continued its upward trend for the third consecutive day, reaching around 0.8560 during early European hours on Wednesday. The pair gained strength following weaker-than-expected inflation data from the United Kingdom (UK), which may influence the Bank of England’s (BoE) upcoming interest rate decision.
UK CPI Slows in May, Supporting BoE Rate Pause Expectations
The UK’s Consumer Price Index (CPI) rose by 3.4% year-over-year in May, according to the Office for National Statistics (ONS). This figure matched expectations and was slightly lower than the 3.5% increase seen in April. However, inflation still remains above the BoE’s 2% target, reducing the likelihood of immediate rate cuts.
On a monthly basis, UK CPI rose just 0.2% in May, a sharp slowdown from the 1.2% rise recorded in April. This figure also aligned with analysts’ expectations. Meanwhile, core CPI, which excludes volatile items like food and energy, increased by 3.5% year-over-year. This was down from April’s 3.8% and below the expected 3.6%.
Euro Strengthens on Hawkish ECB Outlook
The Euro also received a boost from a firmer tone coming from the European Central Bank (ECB). ECB President Christine Lagarde said the cycle of rate cuts is likely nearing its end. She added that the central bank is “in a good position” to manage uncertainties in the economic outlook.
Further support for the Euro came from ECB policymaker Francois Villeroy de Galhau, who echoed Lagarde’s remarks on Tuesday. He noted that the ECB is well-positioned in terms of its monetary policy strategy but warned that recent geopolitical tensions, including the Iran-Israel conflict, could increase uncertainty.
“We should incorporate Euro appreciation into our monetary policy decisions,” Villeroy said. He also backed Lagarde’s comments about strengthening the Euro’s role globally.
Related topics:
