Market Analysis

Mixed UK Consumer Price Index (CPI) data exert downward pressure on the EUR/GBP pair, pushing it to around 0.8540 in the Asian trading session on Wednesday. Investors now await the Eurozone Harmonized Index of Consumer Prices (HICP) for March, slated for release later today.

In March, UK CPI (MoM) held steady at 0.6%, while year-over-year Consumer Inflation edged up to 3.2%, slightly surpassing expectations but lower than the previous month's figure of 3.4%. Meanwhile, Core CPI YoY increased by 4.2%, beating forecasts but below the prior month's 4.5%.

The Pound Sterling (GBP) is under pressure as investors anticipate potential rate cuts by the Bank of England (BoE) this year, with the first expected move possibly in August or September. BoE Governor Andrew Bailey indicated on Tuesday that there is convincing evidence of a decline in UK inflation. The crucial consideration for BoE policymakers, Bailey suggested, is the extent of further evidence needed before contemplating interest rate adjustments.

Conversely, the Euro faces challenges amid speculation that the European Central Bank (ECB) might initiate rate cuts as early as June, driven by a subdued economic outlook in the Eurozone and easing core inflationary pressures.

In a Tuesday interview with CNBC, ECB President Christine Lagarde hinted at imminent rate cuts, barring unforeseen significant developments. Lagarde observed a disinflationary trend in line with expectations and noted that geopolitical events' impact on commodity prices has been relatively limited thus far.

Paraphrasing text from "FX Street" all rights reserved by the original author.