EUR/GBP edges lower as mix Eurozone HICP keeps ECB’s policy outlook uncertain

The EUR/GBP pair dropped from 0.8500 after the Eurozone headline HICP decelerated to 2.5%. ECB Muller predicts further policy easing before year-end, while the BoE is expected to reduce interest rates in August. The pair failed to break the psychological resistance of 1.2500 and retreated after mixed price pressures in June. The preliminary HICP report showed a decrease in headline HICP to 2.5% year-on-year, with core HICP growing by 2.9%. ECB President Christine Lagarde stated that the central bank is not rushing to cut interest rates. ECB policymaker Madis Muller suggested patience with further rate cuts, hinting at a possible cut before year-end. In the UK, easing price pressures may prompt the BoE to start reducing interest rates from the August meeting. The annual shop price inflation grew at the slowest pace of 0.2% in June. The smaller-than-expected lead of Marine Le Pen’s far-right National Rally in France’s legislative elections eased uncertainty over the financial crisis. However, fears could resurface depending on the outcome of the second-round runoffs for new government formation.