EUR/GBP eyes more gains above 0.8850 despite BoE prepares for a 25bp rate hike

The EUR/GBP pair has shifted its auction above the critical resistance of 0.8850 in the early Asian session. The cross is aiming to deliver more gains ahead despite bumper odds of 25 basis points (bps) by the Bank of England (BoE) in its monetary policy meeting, scheduled for Thursday.

On Wednesday, the United Kingdom (UK) Office for National Statistics reported a surprise rise in the Consumer Price Index (CPI) data. Monthly CPI (Feb) accelerated by 1.1% while the street was anticipating growth of 0.6%. The annual headline CPI jumped to 10.4%, higher than the consensus of 9.8% and the former release of 10.1%.

ONS chief economist Grant Fitzner cited "Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing," as reported by Telegraph.

The release of the higher-than-anticipated UK inflation is going to make the interest rate decision from the BoE extremely difficult for policymakers. The central bank has already remained split between hiking rates further to continue to weigh on sticky inflation or pausing the restrictive spell amid the banking fiasco.

The street is anticipating a 25bp interest rate hike by the BoE to 4.25% as the inflation situation has become vulnerable.

On the Eurozone front, the Euro was heavily bought by the market participants on Wednesday after European Central Bank (ECB) President Christine Lagarde reiterated "Inflation is still high and uncertainty around its path ahead has increased." She further added, "While more restrictive credit conditions are part of the mechanism by which our tightening ultimately brings inflation back to target, we will make sure that the process will be orderly."

Going forward, Germany and Eurozone’s preliminary S&P Global PMI (March) data will be keenly watched, which will release on Friday.