The EUR/GBP cross continues with its struggle to capitalize on the move beyond the mid-0.8600s and attracts some sellers during the first half of the European session on Wednesday. The intraday downtick picks up pace following the release of softer Eurozone consumer inflation figures and drags spot prices to a fresh daily low, around the 0.8620 regions in the last hour.
According to the preliminary report published by Eurostat, the annualized Eurozone Harmonised Index of Consumer Prices (HICP) decelerated to a 10.0% YoY rate in November from 10.6% in the previous month. Every month, the HICP declined by 0.1% in November, missing estimates for a 1.5% rise.
The data might have cooled expectations for more aggressive interest rate hikes by the European Central Bank, which, in turn, undermines the shared currency and exerts some pressure on the EUR/GBP cross.
ECB President Christine Lagarde, however, said on Monday that the region’s inflation has not peaked and it risks turning out even higher than currently expected. This points to a series of interest rate hikes ahead, which should act as a tailwind for the Euro. Furthermore, less hawkish remarks by Bank of England (BoE) Chief Economist Huw Pill could help limit the downside for the EUR/GBP cross.
Speaking at an online event, Pill said inflation is expected to fall rapidly in the 2nd half of 2023, and supply chain problems seem to be improving. Pill also pushed back against market expectations and sees a lower peak in the current tightening cycle.
The fundamental backdrop supports prospects for an extension of the EUR/GBP pair’s recent bounce from the 0.8575-0.8570 support zone. That said, the lack of any meaningful buying warrants some caution for aggressive bullish traders.