- EUR/GBP inches up from 0.8639 lows but remains capped below 0.8650 on Tuesday.
- The Euro has been little moved by the hot Eurozone inflation levels released earlier on the day.
- The Pound maintains a bid tone as UK politics jump into the back seat.
The Euro (EUR) remains vulnerable against the British Pound (GBP) on Tuesday, capped below 0.8650, consolidating losses from the previous two trading days. The hotter Eurozone inflation figures have failed to provide any significant support to the Euro, as they do not alter the view that the European Central Bank (ECB) will hike rates next week.
Preliminary data released by Eurostat on Tuesday revealed that the Eurozone Harmonised Index of Consumer Prices (HICP) accelerated to a 3.2% year-on-year (YoY) growth in May, in line with market expectations, from 3.0% (YoY) in April. Likewise, the core HICP rose to a one-year high of 2.5% in the 12 months to May, up from 2.2% in April, above market expectations of a 2.4% increase.
The data confirms the inflationary impact of the energy shock stemming from Iran’s war, while the increase in core inflation suggests that price pressures are spilling through the broader economy, adding pressure on households and businesses. This practically confirms a 25-basis-point rate hike at next week’s monetary policy meeting.
The Sterling, on the other hand, is showing some strength as Prime Minister Keir Starmer seems to have withstood calls to resign, following the disastrous result in May’s local elections, which eases concerns about a void of power, at least for now.
Earlier on Tuesday, Consumer Credit eased to GBP 1.86 billion in April from the upwardly revised GBP1.90 billion in March, with Mortgage approvals increasing to 65.94K from 63,97 K in March against market expectations of a moderate decline. Net Lending to Individuals fell to GBP 6.2 billion in April from GBP 8.7 billion in March. The Pound, however, was little moved after these figures.
