EUR/GBP appreciates to near 0.8530 due to strong Eurozone inflation, weak Pound outlook

• EUR/GBP advances as the Euro strengthens, supported by stronger-than-expected Eurozone inflation data.
• The impact on the ECB's policy outlook is likely to be limited despite the upside surprise.
• The Bank of England is widely anticipated to cut interest rates by 25 basis points on Thursday.

EUR/GBP continues to climb for the fourth consecutive session, trading around 0.8530 during early European hours on Monday. The currency cross is gaining as the Euro (EUR) strengthens on the back of robust Eurozone inflation data, released on Friday.

According to Eurostat, the core Harmonised Index of Consumer Prices (HICP)--which excludes volatile components like food, energy, alcohol, and tobacco--rose by 2.7% year-on-year in April, surpassing both the 2.5% market forecast and March's 2.4% reading. The headline HICP also beat expectations, increasing by 2.2% annually versus the anticipated 2.1%. On a monthly basis, core and headline HICP rose by 1.0% and 0.6%, respectively.

Despite the hotter-than-expected inflation data, the impact on the European Central Bank's (ECB) monetary policy outlook is expected to remain muted. Policymakers are increasingly focused on the broader economic slowdown, particularly amid the added pressure of new tariffs announced by US President Donald Trump. Most ECB officials remain confident inflation will ease back to the 2% target this year, with markets continuing to price in a 25 basis point rate cut at the June meeting.

At the same time, the British Pound (GBP) is facing pressure due to growing expectations that the Bank of England (BoE) will lower interest rates by 25 basis points to 4.25% during its policy meeting on Thursday. The dovish sentiment stems from several factors: lingering global uncertainty tied to US tariffs, a weakening UK labor market, partly due to rising employer social security contributions, and softer-than-expected inflation figures for March.