EUR/GBP aims sustainability above 0.8600 ahead of UK Inflation data

• EUR/GBP is looking for sustainability above 0.8600 as the focus shifts to UK inflation data.
• The heat from red-hot UK inflation could release amid price cuts at factory gates.
• ECB Visco said inflation may come down more quickly as falling energy costs continue to affect a broader range of prices.

The EUR/GBP pair has sensed selling pressure while attempting to break above the round-level resistance of 0.8600 in the London session. The upside bias for the cross is still favored as June’s United Kingdom’s inflation data, which will release on Wednesday at 06:00 GMT, is expected to soften.

As per the preliminary report, the monthly headline Consumer Price Index (CPI) reported a pace of 0.4% lower than the prior pace of 0.7%. While annualized inflation is expected to decelerate to 8.2% against the former release of 8.7%. Core inflation that excludes volatile oil and food prices is expected to remain steady at fresh highs of 7.1%.

According to a survey from Lloyds Bank, UK’s food inflation is expected to soften as producers have cut prices for the first time in more than three years after cost pressures have started to relent. The move by producers will reduce the burden on households as producers are ready to pass on price-cut benefits to end consumers.

In spite of a decline in inflationary pressures, Bank of England (BoE) Governor Andrew Bailey is expected to raise interest rates further as current inflation will take plenty of time to return to the 2% target. Investors are anticipating that interest rates by the BoE will peak around 6.5%.

On the Eurozone front, inflation is consistently slowing but is majorly contributed by a decline in energy prices. European Central Bank (ECB) Governing Council member Ignazio Visco said inflation may come down more quickly than the institution projected last month as falling energy costs continue to affect a broader range of prices, Bloomberg reported. However, core inflation could continue to remain stubborn and keep more interest rates in the pipeline.