During the early European session on Wednesday, the EUR/GBP cross traded around 0.8470, reflecting a softer tone. This follows softer inflation data from the Eurozone in June, fueling expectations that the European Central Bank (ECB) may cut interest rates later this year, thereby weighing on the Euro (EUR).
In contrast, upcoming UK general elections are expected to limit movements in the British Pound (GBP) ahead of Thursday’s vote, with potential post-election results likely to introduce volatility on Friday. Additionally, mounting speculations of a Bank of England (BoE) interest rate cut in the near future are exerting downward pressure on the GBP.
Eurozone’s flash Harmonized Index of Consumer Prices (HICP) for June, reported by Eurostat on Tuesday, showed a year-on-year increase of 2.5%, meeting market expectations. However, the core HICP rose by 2.9% YoY, slightly above consensus. ECB Chief Economist Philip Lane acknowledged the data aligns with ECB’s assessment, maintaining the possibility of further rate cuts.
Later today, investors will closely monitor Purchasing Managers Index (PMI) releases from Germany, France, and the Eurozone for insights into economic health. Furthermore, speeches from ECB officials including Luis de Guindos, Piero Cipollone, Philip Lane, and Christine Lagarde are anticipated to provide further guidance on monetary policy direction.
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