EUR/GBP loses momentum below 0.8400 as traders trim BoE rate cut bets after UK CPI data

• EUR/GBP loses ground around 0.8390 in Wednesday’s European session, down 0.13% on the day. 
• Traders trim the BoE rate cut bets for August after the UK CPI inflation data. 
• The Eurozone HICP inflation data is due later on Thursday, which is expected to show an increase of 0.2% MoM in June. 

The EUR/GBP cross trades on a weaker note near 0.8390 during the early European session on Thursday. The Pound Sterling (GBP) attracts some buyers after the UK Consumer Price Index (CPI) for June. Traders will shift their attention to the Eurozone Harmonized Index of Consumer Prices (HICP) inflation data, which is due later in the day. 

Data released from the Office for National Statistics (ONS) on Wednesday showed that UK CPI increased 2.0% YoY in June, compared to the previous reading of 2.0%. The market consensus was for 2.0% growth. Meanwhile, the Core CPI, excluding volatile food and energy items) rose 3.5% YoY in June, at the same pace as in May while beating the market estimation. On a monthly basis, the UK CPI increased by 0.1% MoM in June, compared to a 0.3% rise in May and the expected 0.1%.

This CPI inflation report indicated that inflation in the United Kingdom might be stickier, triggering traders to lower their bets on BoE rate cuts for August. This, in turn, lifts the Cable and creates a headwind for EUR/GBP. The financial markets are pricing in nearly 35% odds for a move in August, down from 49% before the inflation data. Also, market players are still seeing 48 basis points (bps) of rate cuts by year-end, down from 50 bps earlier.

On the Euro front, the Eurozone HICP is expected to show an increase of 0.2% MoM in June, while the annual figure is estimated to rise 2.5%. Finally, Eurozone core HICP inflation is projected to remain steady at 2.9%. The hotter-than-expected inflation report in the Eurozone might underpin the EUR and cap the downside for the cross.