ING: EUR/GBP To Remain Supported Ahead Of Wednesday's CPI
According to ING economists, the EUR/GBP will likely remain supported as we approach the CPI release on Wednesday. For now, the EUR/GBP continues to inch higher and is already back near the 0.8600 level.
Considering how the CPI is a major risk event for the FX markets, the EUR/GBP will likely get a little softer as we approach Wednesday. But despite this apparent weakness, the pair is likely to remain positive until the situation becomes clear.
If we look around, the volatility in the USD-denominated pairs has increased after the US CPI slowdown. This also affected other currencies, such as the GBP, in hopes that similar themes will play there as well!
But it would be too soon to say that the UK's inflation numbers will be similar to what we are seeing in the USA. In fact, the market's perception is that the Bank of England will likely remain on a rate hike path just like the ECB (European Central Bank).
So in a sense, we can say that it will be a race of which bank is more hawkish and which bank adopts a dovish approach.
UK Inflation Numbers To Dictate BoE's Next Action
As we approach the UK inflation numbers due on Wednesday, some major positioning will be witnessed in the EUR/GBP pair. According to experts, the inflation data from the UK will dictate whether we are really getting a 50 bps rate hike in August or not!
Looking back at the inflation trend in the United Kingdom, there's no doubt that it remains a deeply rooted problem for the BoE. In fact, many members of the board have already talked about how deeply inflation has been embedded in the economy.
With only a few days left in the release of the UK's CPI release data, the pair EUR/GBP will likely remain supported as the GBP bulls will be cautious of making any risky moves.