EUR/GBP Advances as BoE Cut Bets Build on UK Inflation Miss

Summary:

The EUR/GBP cross edged higher to around 0.8565 in early European trading on Wednesday, buoyed by a weaker Pound following softer-than-expected UK inflation data.

BUY EURGBP

Close Time

CLOSED

0.85800

Entry Price

0.87400

0.84800

0.87393 +0.00069 +0.08%

37.6

Pips

Profit

0.84800

0.86176

Exit Price

0.85800

Entry Price

0.87400

The Euro gained ground against the British Pound on Wednesday, with the EUR/GBP pair trading near 0.8565 during the early European session. The move was fueled by disappointing inflation data out of the UK, which suggested the Bank of England (BoE) may be inching closer to an interest rate cut of its own, while the European Central Bank (ECB) remains on a steady path toward monetary easing.

According to data released by the UK's Office for National Statistics (ONS), the Consumer Price Index (CPI) rose 2.6% year-on-year in March, easing from February’s 2.8% and coming in softer than the market’s 2.7% expectation. More notably, the monthly CPI figure climbed just 0.3%, a deceleration from February’s 0.4% increase and below the consensus forecast of another 0.4% print.

Core CPI—which strips out volatile food and energy prices—also remained stable at 3.4% YoY, matching expectations but down slightly from the previous 3.5%. These figures further reinforce the narrative that UK inflation pressures are gradually waning, reducing the urgency for the BoE to maintain its high-interest-rate stance.

The British Pound responded swiftly and negatively to the data, as traders began to price in a growing likelihood that the BoE could join other major central banks in easing monetary policy later this year. While the Bank has adopted a cautious tone in recent months, Governor Andrew Bailey and his colleagues have repeatedly emphasized the importance of incoming data. With CPI now trending closer to the 2% target, calls for a rate cut around mid-year are becoming louder.

From a market perspective, these inflation numbers increase the probability of a rate cut by the BoE in the summer. While wage growth remains a complicating factor, the inflation story is clearly moving in the right direction for doves on the Monetary Policy Committee (MPC).

Meanwhile, across the Channel, the ECB is widely anticipated to reduce its deposit rate by 25 basis points at its Thursday meeting, bringing the benchmark down to 2.25%. This would mark the third rate cut in the current cycle, reinforcing the bank’s pivot toward monetary easing amid slowing economic momentum in the Eurozone.

Expectations for the ECB move are already fully priced in, according to euro area swaps markets. A further dovish signal could materialize if Eurozone Harmonized Index of Consumer Prices (HICP) data due later on Wednesday aligns with forecasts or comes in weaker.

Rabobank's senior macro strategist, Bas van Geffen, recently highlighted short-term uncertainties such as global trade disruptions and geopolitical tensions, including former U.S. President Donald Trump's proposed tariffs, as key variables in the ECB's decision-making calculus. These headwinds, along with softening inflation in the bloc, make a rate cut not just likely, but necessary from a policy perspective.

Technical Analysis

From a technical standpoint, the EUR/GBP pair appears to be stabilizing after retreating from levels above 0.8700 earlier this month. The hourly chart shows the pair in a consolidation phase, recovering modestly after testing support near 0.8520.

Currently, the cross is trading just below the 50-hour simple moving average, with a minor uptick observed after reclaiming the 0.8540 handle. The next resistance level looms at around 0.8570, where a bearish trendline and the 23.6% Fibonacci retracement of the 0.8738 to 0.8518 downswing intersect.

A decisive break above 0.8570 could open the door for a more meaningful recovery, with the next key resistance at 0.8630—a level coinciding with the 50% Fibonacci retracement. Should bulls manage to push through that ceiling, upside momentum could extend toward 0.8685 and potentially as high as 0.8740.

Conversely, failure to hold above immediate support at 0.8520 may lead to renewed downside pressure. A break below 0.8500 would invalidate the short-term bullish setup, exposing the cross to further losses toward the 0.8360 zone, a level last seen in early February.

TRADE RECOMMENDATION

BUY EURGBP

ENTRY PRICE: 0.8580

STOP LOSS: 0.8480

TAKE PROFIT: 0.8740

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EUR/GBP Advances as BoE Cut Bets Build on UK Inflation Miss

Risk Disclosure