- EUR/GBP has gauged an intermediate cushion around 0.8810 as BoE claims rapid inflation softening ahead.
- The BoE announced a 25 bps rate hike and pushed rates to 4.25% despite fears of banking turmoil.
- ECB Knot is in favor of further rate hikes in May as inflation is showing no signs of abating.
The EUR/GBP pair has found an intermediate cushion around 0.8810 in the early Tokyo session. Earlier, the cross witnessed a sell-off after the Bank of England (BoE) announced an eleventh consecutive rate hike to sharpen its tools in the battle against double-digit inflation. BoE Governor Andrew Bailey announced a rate hike by 25 basis points (bps) and pushed rates to 4.25%.
The asset is expected to deliver more weakness ahead as the street believes that the United Kingdom (UK) inflation is extremely stubborn and will take plenty of time to get contained. The BoE has come a long way by hiking rates to 4.25% and the annual inflation is still in the double-digit figure, showing no evidence of softening ahead.
On Wednesday, the UK Office for National Statistics reported a surprise jump in the headline Consumer Price Index (CPI) to 10.4% while the street was anticipating a decline to 9.8%. BoE stated that the surprise upside was mainly the impact of less often volatile clothing prices, which won’t last long.
The central bank is very much confident that inflation will start decelerating rapidly from the second quarter. However, the labor shortage and higher food prices might continue to keep inflation at elevated levels. For further guidance, investors will focus on the Retail Sales data, which is expected to contract by 4.7% on an annual basis.
On the Eurozone front, European Central Bank (ECB) policymaker Klaas Knot said that the ECB is unlikely to be done with rate hikes and added that they still think that they need to raise the policy rate in May. Investors should be aware that the ECB hiked rates by 50 bps last week. No doubt, more hikes must be in pipeline as ECB President Christine Lagarde has been reiterating that higher inflation would stay for a longer period.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD remains stuck near 1.0800 after US employment data

EUR/USD struggles to find direction and moves up and down in a narrow channel at around 1.0800 in the American session on Wednesday. The data from the US showed that employment in the private sector rose less than expected in November and helped the pair limit its losses.
GBP/USD battles 1.2600 after US ADP data

GBP/USD is having a difficult time stabilizing above 1.2600 after closing the first two trading days of the week in negative territory. Despite the weaker-than-expected ADP Employment Change data, the US Dollar stays relatively resilient amid cautious market stance.
Gold rebounds to $2,030 as US yields stretch lower

Gold recovered toward $2,030 after testing $2,020 earlier in the day. The benchmark 10-year US Treasury bond yield declined to its lowest level in three months below 4.15% after US employment data and helped XAU/USD gain traction.
Bitcoin-based meme coin ORDI price action wobbles after 1,100% rally

The Bitcoin-based BRC-20 meme coin, which had people confused as being an actual valuable token, is now slowly creeping up to that status. ORDI price rise over the past couple of days has been astonishing, and with BTC driving the price and crossing $44,000, ORDI is also gaining rapidly. But not for long.
The Dollar is struggling to trend

For the last three trading sessions, the dollar index has been crossing up and down the 200-day moving average every day. All in all, the flirting with this level has been going on for more than three weeks, during which neither bulls nor bears were able to form a stable trend.