In the early hours of trading in Europe on Wednesday, the EUR/GBP exchange rate picked up pace, reaching about 0.8525. The British pound weakened against the euro following the release of the UK’s inflation report, and attention is now turned to the European Central Bank’s (ECB) upcoming interest rate announcement scheduled for Thursday.
According to data from the Office for National Statistics (ONS) released Wednesday, the composite consumer price index (CPI) in the UK rose 2.6% year-on-year in June, which is down from 2.8% in May. This outcome fell short of market expectations that anticipated a 2.7% increase.
On the other hand, the core CPI—which excludes the often fluctuating prices of food and energy—also increased by 2.6% year-on-year in June, similar to the previous figure but surpassing the expected growth of 2.5%. Month-over-month, UK CPI inflation slightly dipped to 0.1% in June, down from 0.2% in May, aligning with market predictions.
The immediate aftermath of the British CPI inflation report saw the pound drawing some selling interest, as it eased concerns over the likelihood of an interest rate hike from the Bank of England (BoE) later this month.
As for the euro, many analysts anticipate that the ECB will maintain its current interest rates during its policy meeting in July, although they may refrain from providing insights about future movements. Nonetheless, reports indicate that the market has effectively factored in two additional interest rate increases by the ECB before early 2027.
