The EUR/GBP currency pair slipped to a fresh 1-month low on Wednesday, after data showed UK consumer price inflation had eased to its lowest level since September 2021 in March, adding to prospects of an interest rate cut by the Bank of England.
Annual CPI inflation slowed to 3.2% in March from 3.4% in February, while market consensus had pointed to a slowdown to 3.1%.
The drop was mostly driven by a slowdown in food inflation (4% versus 5% in February).
UK’s services inflation, which is also closely watched by the central bank, decelerated slightly to 6% in March from 6.1% in February.
“Headline inflation took another small step on the path back to target,” Jake Finney, economist at PwC UK, was quoted as saying by Reuters.
“However, the Bank is likely to want more conclusive evidence that we have achieved a sustainable return to target before they pivot to rate cuts.”
UK’s annual core CPI inflation, which excludes volatile categories such as food and energy, decelerated to 4.2% in March from 4.5% in February. It has been the lowest core inflation rate since December 2021.
Meanwhile, EUR traders are now expecting the final CPI inflation data for March coming out of the Eurozone later today.
Annual consumer inflation in the bloc slowed to 2.4% in March, while matching November’s 28-month low, from 2.6% in February, according to the preliminary estimate.
Annual core CPI inflation, which excludes volatile categories such as food and energy, slowed for the 8th consecutive month to 2.9% in March from 3.1% in February.
Currency Pair Performance
As of 7:33 GMT on Wednesday the EUR/GBP currency pair was edging down 0.13% to trade at 0.8533.
Earlier in the session, the minor Forex pair went down as low as 0.8521. The latter has been the pair’s weakest level since March 12th (0.8518).
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