EUR/GBP holds gains above 0.8800 following German HICP inflation data

• EUR/GBP maintains its position following German inflation data.
• Germany's Harmonized Index of Consumer Prices climbed by 2.3% YoY in October, as expected.
• BoE's Megan Greene expressed doubt that the UK's monetary policy is sufficiently restrictive.

EUR/GBP extended its gains for the second successive session, trading around 0.8810 during the early European hours on Wednesday. The currency cross remains stronger near 0.8829, the highest since May 2023, reached on November 5, following the release of Consumer Price Index (CPI) and Harmonized Index of Consumer Prices (HICP) data from Germany.

Germany's Harmonized Index of Consumer Prices rose by 2.3% year-over-year (YoY) in October, matching the market expectations and the prior reading. The monthly HICP inflation remained at 0.3% in the same month. The CPI came in at a 2.3% increase YoY, while monthly inflation remained consistent at 0.3%, as expected.

ECB policymaker Francois Villeroy de Galhau said Wednesday that the French economy remains resilient despite political uncertainty, noting that households save heavily due to concerns over the public deficit. Galhau added that domestic and international uncertainties are weighing about 0.5% on GDP.

The EUR/GBP cross may further appreciate as the Euro (EUR) receives support from a cautious tone surrounding the European Central Bank (ECB) policy outlook. The ECB is expected to keep interest rates unchanged for now, backed by steady economic performance and inflation near target.

Additionally, the EUR/GBP cross gained ground as the Pound Sterling (GBP) struggles against its peers amid growing expectations that the Bank of England (BoE) will cut interest rates in December. Analysts at Morgan Stanley, Citigroup, and UBS Global Research have shifted their stance and expect the BoE to cut interest rates by 25 basis points (bps) to 3.75%.

BoE policymaker Megan Greene stated on Tuesday that she is not convinced the United Kingdom's (UK) monetary policy is meaningfully restrictive. Greene noted that wage settlement data for next year is higher than desired and expressed concern about persistent inflation in the UK, suggesting that monetary policy may need to be more restrictive. She also emphasized that risk management around inflation should play a key role in shaping the BoE's policy outlook, per Reuters