EUR/GBP holds positive ground above 0.8550 after UK CPI inflation data

• EUR/GBP strengthens to around 0.8565 in Wednesday's early European session. 
• UK CPI inflation declined to 2.6% YoY in March vs. 2.7% expected. 
• The ECB is widely expected to lower interest rates on Thursday, bringing its deposit rate down to 2.25%. 

The EUR/GBP cross gains momentum to near 0.8565 during the early European session on Wednesday. The Pound Sterling (GBP) weakens against the Euro (EUR) after the UK Consumer Price Index (CPI) inflation report. The attention will shift to the Eurozone Harmonized Index of Consumer Prices (HICP) data, which is due later on Wednesday. 

Data released by the United Kingdom's Office for National Statistics on Wednesday showed that the country's headline CPI rose 2.6% YoY in March, compared to a rise of 2.8% in February. This reading came in softer than the 2.7% expected. The Core CPI, which excludes the volatile prices of food and energy, climbed 3.4% YoY in March versus 3.5% prior, in line with the market consensus of 3.4%. 

Meanwhile, the monthly UK CPI inflation eased to 0.3% in March from 0.4% in February. Markets projected a rise of 0.4% reading. The Pound Sterling remains weak in an immediate reaction to the cooler-than-expected UK CPI inflation data.

On the Euro front, markets are fully priced for another quarter-percentage-point rate cut by the European Central Bank (ECB) to 2.25% on Thursday. The ECB lowered interest rates for the second consecutive time in March, bringing the deposit rate down to 2.5%. A further reduction would see the rate reduction to 2.25%. Bas van Geffen, a senior macro strategist at Rabobank, noted that confusion caused by Trump's tariffs could lead to a 25 bps cut, as short-term uncertainties remain a source of concern.