EUR/GBP rises to 0.8550 ahead of UK Inflation, BoE policy

• EUR/GBP rebounds to 0.8550 amid uncertainty over the Pound Sterling outlook ahead of the BoE policy meeting.
• The UK inflation data will influence expectations for the BoE to reduce interest rates from August.
• Eurozone ZEW Survey- Economic Sentiment improves sharply to 33.5 in March.

The EUR/GBP pair jumps to 0.8550 in the European session on Tuesday. The asset rises ahead of key United Kingdom economic events this week. The Pound Sterling will be influenced by the Bank of England’s (BoE) interest rate decision, which will be announced on Thursday.

The BoE is widely anticipated to keep interest rates unchanged at 5.25% as inflation is far from the desired rate of 2%. Investors await fresh cues about when the BoE could begin reducing interest rates. Currently, market participants anticipate that the BoE will announce their first rate cut in the August policy meeting after maintaining a hawkish stance for more than two years.

BoE policymakers have been reiterating that rate cuts would be appropriate only if they are convinced that inflation will return sustainably to the desired target of 2%.

Before the BoE policy, investors will focus on the UK Consumer Price Index (CPI) data for February, which will be published on Wednesday. The annual headline inflation is forecast to have grown at a slower pace of 3.6% against 4.0% in January. In the same period, core inflation that excludes volatile food and energy prices is forecast to have decelerated to 4.6% from 5.1%.

Meanwhile, the Euro rises on upbeat Eurozone ZEW Survey—Economic Sentiment. The economic data showcases institutional investors' sentiment towards the economic outlook improving significantly to 33.5 from expectations of 25.4 and the former reading of 25.0.

Going forward, the Euro will be guided by market expectations for the European Central Bank's (ECB) rate cuts. Investors expect the ECB to start reducing interest rates by summer.