UK May CPI rose 2.8% YoY, below forecasts, pressuring GBP ahead of Thursday’s BoE rate decision.
The EUR/GBP pair climbed to 0.8650 in early European trading on Wednesday, driven by weaker-than-expected UK inflation data for May. Headline CPI increased 2.8% YoY, matching April’s print but falling short of expectations for a higher reading. Core CPI rose 2.6% YoY, below the 2.7% consensus forecast, while monthly CPI eased to 0.2% from 0.7% in April.
The data follows the Bank of England’s upcoming rate decision, where markets expect rates to remain unchanged at 3.75%. Governor Andrew Bailey has signaled caution, citing potential inflation risks from geopolitical tensions. Meanwhile, the European Central Bank raised rates last week for the first time since September 2023, citing Middle East conflict as a key inflation driver.
The GBP faced immediate selling pressure after the release, reflecting investor concerns over persistent inflation and the BoE’s cautious stance. Attention now shifts to Thursday’s UK employment data and the BoE’s policy announcement.