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Euro gains versus British pound as UK inflation mix weighs on GBP
EUR/GBP traded around 0.8533 after UK CPI eased, while the ECB meeting Thursday is the key risk for the euro.
EUR/GBP edged higher Wednesday as a mixed UK inflation print weighed on the British pound, pushing the cross to around 0.8533 and extending its rebound after it fell to a more than one year low earlier in the month, according to FXStreet.
The data showed UK CPI rose 0.1% in June versus 0.2% in May, with annual inflation cooling to 2.6% from 2.8%. Core inflation held at 2.6%, above expectations of 2.5%, and the report came after a separate UK labour update that pointed to cooling wage pressures and weak hiring.
FXStreet said the combined inflation and labour signals reduce the likelihood of a near-term Bank of England rate hike, but added that inflation risks remain elevated. Renewed US-Iran fighting is also cited as a factor disrupting oil flows through the Strait of Hormuz, lifting energy prices.
With the focus shifting to Europe, FXStreet noted that the ECB’s policy decision on Thursday is the main risk event for the euro. The central bank is expected to keep its Deposit Facility Rate unchanged at 2.25% after a 25 basis point increase in June, and markets look for another rate hike in September as energy prices keep inflation risks in view.