EUR/GBP EXHIBITS VOLATILITY CONTRACTION AHEAD OF EUROZONE INFLATION

30 May 2024, 13:06

EUR/GBP stays sideways near 0.8500 as investors await the Eurozone Inflation data.

The Eurozone inflation data will influence the ECB’s rate-cut path beyond June.

Exit polls for UK elections suggest that the Labour Party will come into power.

The EUR/GBP pair trades inside Wednesday’s trading range in Thursday’s session, reflecting indecisiveness among market participants ahead of the release of the preliminary Eurozone inflation data for May, which will be published on Friday.

Investors remain certain about the European Central Bank (ECB) to begin reducing interest rates from the June meeting. Therefore, financial markets are discussing about how fast and far the ECB will cut interest rates beyond June. Majority of ECB policymakers have advocated for a gradual rate-cut approach to limit risks of inflation revamping again.

For fresh guidance on the interest rate outlook, investors await the Eurozone inflation data. Economists expect that annual Harmonized Index of Consumer Prices (HICP) rose at a stronger pace of 2.5% from the prior reading of 2.4%. The annual core HICP is estimated to have accelerated to 2.8% from 2.7% in April.

Hotter-than-expected inflation data would weaken speculation for the ECB deploying an aggressive policy easing approach. While soft numbers would prompt expectations that the ECB will announce subsequent rate cuts.