• EUR/GBP comes under some selling pressure following the release of the UK inflation figures.
• The stronger UK CPI print reaffirms bets for more BoE rate hikes and boosts the British Pound.
• Bets for a smaller ECB rate hike contribute to the Euro's underperformance and exert pressure.

The EUR/GBP cross meets with some supply during the early European session on Wednesday and drops to a fresh weekly low, around the 0.8810 region in reaction to stronger UK consumer inflation figures.

The British Pound strengthens a bit after the UK Office for National Statistics (ONS) reported that the headline UK CPI eased less than expected, to a 10.1% YoY rate in March from the 10.4% recorded in the previous month. Furthermore, the Core CPI, which excludes volatile food and energy items, held steady at 6.2% YoY during the reported month, beating expectations for a slide to 6.0%. This comes on the back of the stronger UK wage growth data on Tuesday and should keep pressure on the Bank of England (BoE) to raise interest rates further, which, in turn, is seen dragging the EUR/GBP cross lower.

The shared currency's relative underperformance could further be attributed to the fact that the European Central Bank (ECB) policymakers have left the door open to a downshift in the pace of interest rate hikes. In fact, ECB member Martins Kazaks said on Monday that the central bank might opt for a 25 bps hike at the next meeting in May. This further contributes to a mildly softer tone surrounding the EUR/GBP cross. That said, the lack of any strong follow-through selling warrants some caution for aggressive bearish traders and before positioning for any further intraday depreciating move, at least for now.

Market participants now look forward to the release of the final Eurozone CPI print, which might influence the Euro and provide some impetus to the EUR/GBP cross. Apart from this, traders will take cues from the BoE's Quarterly Bulletin for the central bank’s view on the state of the UK economy. This might further contribute to producing short-term trading opportunities ahead of BoE MPC Member Catherine Mann's scheduled speech.

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