The Pound Sterling (GBP) strengthened against the Euro (EUR) on Wednesday after hotter-than-expected UK inflation data dampened expectations of a Bank of England (BoE) rate cut in June.

Reason for GBP Strength:

• Higher UK Inflation: The UK’s Consumer Price Index (CPI) came in higher than anticipated, exceeding market forecasts and reaching 2.3% year-on-year in April.
• BoE Rate Cut Odds Decline: This strong inflation data caused a decline in the probability of a June rate cut by the BoE, from 50% to 12%.
• Contrast with ECB: In contrast, the European Central Bank (ECB) is still expected to deliver a rate cut in June, potentially widening the monetary policy divergence between the two central banks and supporting the GBP.

Technical Analysis (EUR/GBP):

• EUR/GBP Retreats: The EUR/GBP currency pair dropped to 0.8505 on Wednesday, reflecting the GBP’s gains.
• Bearish Indicators: The Relative Strength Index (RSI) on the daily chart suggests a negative trend, potentially dipping into oversold territory.
• MACD: The Moving Average Convergence Divergence (MACD) indicator also shows rising red bars, signifying increasing bearish momentum.
• Simple Moving Averages (SMAs): The EUR/GBP is trading below its 20, 100, and 200-day SMAs on the daily chart, further indicating a potential downtrend.

The surprise inflation data in the UK has boosted the Pound and weakened the Euro. The prospect of a delayed rate cut by the BoE compared to the ECB’s expected cut in June could put further downward pressure on the EUR/GBP in the near term. However, it’s important to note that economic data and central bank pronouncements can change rapidly, so staying updated on developments is crucial.