EUR/GBP recovers sharply from 0.8570 despite BoE rate-cut bets trim

The EUR/GBP pair recovers strongly from the crucial support of 0.8570 in the European session. The cross witnessed a decent buying interest despite stubborn price pressures in the United Kingdom economy have pushed back expectations of early rate cuts by the Bank of England (BoE).

Inflation in the UK economy unexpectedly remained stubborn amid increase in air fare prices and slight increase in services inflation. This has offered more room to BoE policymakers to keep interest rates unchanged at 5.25% ahead.

Meanwhile, investors await the UK Retail Sales data for December, which will provide fresh cues about inflation. As per the estimates, monthly sales at retail stores contracted by 0.3% after increasing strongly by 1.3% in November. In the same period, annual Retail Sales grew at a robust pace of 1.1% against slight increase of 0.1%.

An upbeat consumer spending report would allow BoE policymakers to stick with hawkish signals on the interest rate outlook.

In the BoE credit conditions survey, agency anticipates that default rates for mortgages and unsecured lending are expected to rise in the first quarter this year. Individuals are struggling to address higher interest obligations due to deepening cost-of-living crisis.

On the Eurozone front, the Euro finds strength as European Central Bank (ECB) President Christine Lagarde pushed back expectations of aggressive rate cuts. Lagarde said she expects rate cut decision in late summer as inflation is still higher than what the ECB has anticipated.