Sterling resumes gains against euro after surprise inflation data

Sterling rose in European trade against euro, resuming the gains after a hiatus yesterday from off two-month highs, with the pound boosted by surprise UK inflation data, which bolstered the case for a 0.25% rate hike by Bank of England tomorrow.

In Europe, investors are still questioning the upcoming policy path by the European Central Bank despite remarks by ECB President Christine Lagarde about extending rate hikes in the euro zone.

EUR/GBP fell 0.45% to 0.8772, with a session-high at 0.8819.

The pound fell 0.9% against euro yesterday, the first loss in five days, and the largest in 2023 on profit-taking off two-month highs at 0.8718.

Surprise Inflation

UK consumer prices surged 10.4% in February, above estimates of 9.9%, and up from 10.1% in January.

Such a surprise increase in inflation after three months of dips shows the ongoing inflationary risks for the economy.

UK Rates

After the data, pricing for a 0.25% rate hike by the Bank of England tomorrow rose to a full 100%.

Strong Banking System

Bank of England said in a statement following UBS's acquisition of Credit Suisse that the UK banking system remains strong and safe with good capital and liquidity. 

Christine Lagarde

ECB President Lagarde said there's still no evidence that the inflation in the euro zone is slowing down.

She said the ECB isn't finished yet with interest rate hikes this year to reign in inflation.