EUR/GBP rises to near 0.8350 after weak UK CPI data
- EUR/GBP appreciates following the data release of the UK Consumer Price Index on Wednesday.
- The UK CPI increased by 2.8% year-over-year, falling short of the expected 2.9%.
- The Euro faced challenges amid expectations that the European Central Bank could reduce interest rates again in April.
The EUR/GBP pair regained ground on Wednesday following the release of disappointing Consumer Price Index (CPI) data from the United Kingdom (UK). The pair is currently trading around 0.8340 during Asian market hours.
In February, the UK’s CPI rose 2.8% year-over-year, slowing from January’s 3.0% increase and missing market expectations of 2.9%. Despite the decline, inflation remains above the Bank of England’s (BoE) 2% target. Meanwhile, core CPI, which excludes food and energy prices, increased by 3.5% YoY, easing from January’s 3.7% and coming in below the forecasted 3.6%.
The Pound Sterling (GBP) faced additional pressure after the BoE left interest rates unchanged at 4.5% last week. Eight of the nine Monetary Policy Committee (MPC) members voted to maintain current borrowing costs, while policymaker Swati Dhingra was the sole supporter of a 25-basis-point (bps) rate cut. Economists had anticipated that two officials might favor a reduction.
However, EUR/GBP’s gains could be capped as the Euro remains under pressure amid expectations that the European Central Bank (ECB) could lower interest rates again in April. ECB Governing Council member François Villeroy de Galhau stated on Tuesday that further rate cuts are possible and that the 2.5% deposit rate could drop to 2% by the summer’s end.
Meanwhile, ECB President Christine Lagarde told the European Parliament last week that the inflationary impact of trade tensions driven by US President Donald Trump would be temporary, as weaker economic activity would eventually ease inflationary pressures.
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Wed Mar 26, 2025 07:00
Frequency: Monthly
Actual: 2.8%
Consensus: 2.9%
Previous: 3%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.