In the early European session on Tuesday, the EUR/GBP pair grapples to maintain auction above the immediate support level of 0.8530. The cross experiences downward pressure as the Euro weakens, driven by expectations of the European Central Bank (ECB) becoming the second among central banks in developed nations to consider rate cuts.
ECB policymakers perceive market expectations for a reduction in borrowing rates starting from the June meeting as reasonable. The annual core Consumer Price Index (CPI), excluding volatile food and energy prices, notably dipped to 2.9% in March. This decline in Eurozone core CPI over the past eight months signals a sustained drop in inflation toward the 2% target.
In its recent monetary policy meeting, the ECB maintained its Main Refinancing Operations Rate at 4.5%, aligning with projections. ECB President Christine Lagarde stated during a monetary policy conference that if a fresh assessment boosts policymakers’ confidence in inflation returning to target, a rate cut “would be appropriate,” according to Reuters.
Conversely, the Pound Sterling finds support against the Euro amid expectations of the ECB potentially shifting to rate cuts sooner, although it exhibits weakness against the US Dollar. The Pound faces pressure following bleak labor market data for the quarter through February, signaling a gloomy economic outlook.
The UK Office for National Statistics (ONS) reported a significant uptick in the Unemployment Rate to 4.2%, surpassing expectations of 4.0% and the previous reading of 3.9%. Notably, UK employers shed 156,000 workers in February, marking an increase from 89,000 in January.
Looking ahead, investor attention will be directed towards the UK Consumer Price Index (CPI) data for March, scheduled for release on Wednesday. The inflation figures are poised to exert considerable influence on market sentiments regarding potential Bank of England (BoE) rate cuts, currently anticipated to occur from the August meeting.
