EUR/GBP traded close to 0.8850 yesterday but dropped back below 0.8800 today after a surprise acceleration in UK inflation. Nonetheless, economists at ING maintain a bullish bias over the coming weeks.
Surprise acceleration in inflation
“Headline CPI YoY rose from 10.1% to 10.4%, defying expectations for a drop below 10.0%. Core inflation also accelerated, from 5.8% to 6.2%.”
“Today’s data – along with the tentative recovery in market sentiment – reinforces the prospect of a Bank of England rate hike tomorrow (which is also our base case). Still, we still deem a May pause as highly likely, and we continue to see the direction for EUR/GBP as bullish over the coming weeks.”