EUR/GBP juggles above 0.8800 ahead of Eurozone Inflation and UK GDP data

• EUR/GBP is oscillating above 0.8800 as investors await Eurozone HICP and UK GDP for fresh impetus.
• Eurozone headline inflation to soften due to lower energy prices while the core figure could elevate.
• The street is split about BoE’s monetary policy outlook as more rate hikes would deepen recession fears.

The EUR/GBP pair is delivering a lackluster performance as investors have sidelined ahead of the release of the Eurozone Harmonized Index of Consumer Prices (HICP) and the United Kingdom’s Gross Domestic Product (GDP) data.

The release of the German HICP data on Thursday indicates that headline figures could soften dramatically as energy prices have dropped firmly. However, a shortage of labor and eventually shifting of bargaining power in hands of job seekers would keep core figures firmer. Reuters reported that due to a shortage of job seekers and wage growth is now between 5% and 6%, the highest in decades. This might force the European Central Bank (ECB) to continue to hike rates further in order to achieve price stability.

According to the consensus, Eurozone’s preliminary headline HICP (March) would soften to 7.1% from the former release of 8.5%. Contrary to that, core HICP is expected to escalate to 5.7% vs. the prior release of 5.6%.

Apart from that, German Retail Sales (Feb) data will be keenly watched. Monthly retail demand is expected to expand by 0.5% against a contraction of 0.3%. An expansion in retail demand might bolster the chances of more rate hike announcements from ECB President Christine Lagarde.

On the UK front, investors are awaiting the GDP (Q4) data. As per the consensus, UK’s growth has remained stagnant in the fourth quarter of CY2022. Annual GDP is expected to remain steady at 0.4%.

Meanwhile, UK inflation is expected to remain elevated as shop price inflation is accelerating led by high food inflation. The street is split about the Bank of England’s (BoE) monetary policy outlook as investors are worried that more rate hikes would deepen recession fears or inflation would remain elevated if the policy remained unchanged.