- EUR/GBP posts modest gains near 0.8675 in Thursday’s early European session.
- The UK CPI inflation climbed to 3.3%YoY in March, driven by higher fuel costs due to the Iran war.
- ECB’s Simkus said the central bank shouldn’t raise interest rates in April.
The EUR/GBP cross trades with mild gains around 0.8675 during the early European session on Thursday. However, the potential upside for the cross might be limited due to hot UK inflation data. Traders will keep an eye on the preliminary readings of the Purchasing Managers Index (PMI) from the Eurozone and the United Kingdom (UK).
Data released by the Office for National Statistics (ONS) on Wednesday showed that the UK headline Consumer Price Index (CPI) inflation rose to 3.3% YoY in March, compared to 3.0% in February. This increase marks the first official reflection of the US-Israel war with Iran on the UK’s cost of living. The core CPI, excluding volatile food and energy items, climbed 3.1% YoY in March, versus 3.2% prior, below the forecast of 3.2%.
The Bank of England (BoE) is expected to hold the base rate at 3.75% at its next meeting on April 30, though the jump in inflation has fueled speculation of potential future hikes or delayed cuts.
The European Central Bank (ECB) officials are leaning toward leaving interest rates unchanged at the April policy meeting. ECB Governing Council member Martins Kazaks said on Wednesday that the central bank has ‘luxury’ to wait on interest rate rises.
Meanwhile, ECB policymaker Gediminas Simkus reiterated the cautious stance regarding the ECB’s monetary policy, saying that while a rate hike in April is unlikely, the door remains open for policy tightening later this year. While a hold is expected in the April policy meeting, Barclays analysts anticipate the focus to shift toward potential 25 basis point (bps) hikes in June and September to combat an energy-driven inflation surge.
