Ella 
In the Asian market on Thursday, EUR/GBP strengthened after falling for two consecutive days, trading around 0.8340. However, EUR/GBP’s upside may be limited as stronger-than-expected UK inflation on Wednesday reinforced the Bank of England’s cautious preference for future rate cuts.
UK inflation surged to a six-month high of 2.3% year-on-year in October, up from 1.7% in September and stronger than expectations for 2.2%. The consumer price index rose 0.6% on a monthly basis after remaining flat. Meanwhile, core inflation, which excludes volatile food and energy prices, rose to 3.3%, above expectations of 3.1%.
In addition, the service sector inflation rate rose to 5% from the previous value of 4.9%. If price pressures continue to build, traders may reconsider expectations for a rate cut from the Bank of England at its December policy meeting.
On Wednesday, Yannis Stournaras, a member of the Governing Council of the European Central Bank (ECB), said that the euro zone is close to achieving the 2% inflation target sustainably. According to Bloomberg, Stonaras stressed that policymakers have a responsibility to ensure that this target is not lowered.
At the same time, the EU Financial Stability Review pointed out that escalating geopolitical tensions and policy uncertainty are exacerbating sovereign vulnerabilities, while intensifying global trade disputes are increasing the risk of economic shocks.
Since June, the ECB has cut interest rates three times as inflation approaches its 2% target. However, growth forecasts have been revised down twice. The ECB is widely expected to cut interest rates by 25 basis points next month, with a larger rate cut unlikely.
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