EUR/GBP continued its downward trajectory for the second consecutive day, trading around 0.8690 during Asian hours on Wednesday, as investors remained cautious ahead of the United Kingdom’s March Consumer Price Index (CPI) data release [1]. Market expectations are for headline inflation to rise to 3.3% year-on-year from 3.0%, while Core CPI is projected to remain steady at 3.2% [1].
Recent UK labor market data for March presented a mixed outlook. The ILO Unemployment Rate declined to 4.9%, outperforming the 5.2% consensus, but the Claimant Count increased by 26.8K, surpassing the 21.4K forecast. Additionally, the 3M Employment Change slowed to 25K from 84K previously, and Average Earnings Excluding Bonuses moderated to 3.6% YoY, slightly above the 3.5% estimate [1].
Jane Foley, Senior FX Strategist at Rabobank, highlighted that ongoing UK political uncertainty, including Prime Minister Starmer’s standing and Labour’s prospects in the May election, could weigh on Pound Sterling sentiment. Foley also noted that earlier GBP strength was driven by aggressive Bank of England tightening bets, which have since been scaled back, leaving the currency vulnerable amid persistent inflation and rate volatility [1].
On the Eurozone side, European Central Bank President Christine Lagarde warned that the outlook remains highly uncertain due to a significant energy supply shock linked to Middle East tensions and the Strait of Hormuz blockade. While energy prices have not yet reached worst-case scenarios, Lagarde emphasized the fragility of the current outlook [1].
CONCLUSION
EUR/GBP remains under pressure as traders await key UK inflation data, with mixed labor market signals and political uncertainty weighing on GBP sentiment. The Eurozone faces its own risks from energy supply shocks, adding to the cautious market tone. Overall, the market impact is medium, with sentiment slightly negative due to prevailing uncertainties.