EUR/GBP steadies around 0.8300 ahead of ECB’s interest rate decision

• EUR/GBP is balancing around 0.8300 as investors await ECB’s monetary policy announcement.
• The ECB is expected to maintain the status quo on policy rates along with hawkish guidance.
• The UK’s 12-month inflation rose to 7% against the estimate of 6.7%.

The EUR/GBP pair is consolidating in a narrow range of 0.8294-0.8305 after a three-day losing streak in early Tokyo. The consolidation is displaying a minor pause after a deep correction as investors are awaiting the announcement of monetary policy by the European Central Bank (ECB) on Thursday.

As per the market consensus, the ECB is likely to announce an unchanged interest rate policy. However, hawkish guidance for further policies cannot be ruled out. The Eurozone is facing the heat of price pressures amid soaring energy bills and commodity prices, thanks to the Ukraine crisis that has lifted commodities prices and has collapsed the supply chain. Also, the recent discussion on the embargo on Russian oil is going to haunt the Eurozone for a prolonged period. To reduce the risks of higher inflation, the ECB is expected to sound hawkish for the remaining year.

Meanwhile, the pound is performing strongly against the shared currency after displaying a higher UK Consumer Price Index (CPI) on Wednesday. The yearly UK inflation has landed at 7%, much higher than the forecast of 6.7% and prior print of 6.2%. This has spurted the chances of a fourth-rate hike by the Bank of England (BOE) in May.

The yearly UK’s Core CPI jumped to 5.7% while the Retail Price Index surged to 9% against the estimate of 8.8% in the same period.