• EUR/GBP edges higher on Tuesday, supported by a firmer Euro driven by stronger Eurozone inflation data.
• Headline HICP accelerates to 2.2% while unemployment remains stuck at a 16-month high.
• Expectations of Bank of England rate cuts weigh on the GBP, despite cautious remarks from a policymaker.

EUR/GBP trades slightly higher on Tuesday, around 0.8800 at the time of writing, up about 0.15% on the day. The cross benefits from support for the Euro (EUR) after the release of marginally stronger macroeconomic data in the Eurozone, while the Pound Sterling (GBP) faces a context increasingly tilted toward interest rate cuts in the United Kingdom (UK).

Preliminary data published by Eurostat show that the Harmonized Consumer Price Index (HCPI) accelerated in November to 2.2% YoY, up from 2.1% in October and above expectations, while the core index remained unchanged at 2.4%, defying forecasts for an uptick. On a monthly basis, headline inflation declined by 0.3% and the core measure fell by 0.5%, confirming a seasonal moderation but not a structural retreat in prices.

Economists at Nordea note that inflation remains “close to the European Central Bank (ECB) target”, though services inflation at 3.5% YoY highlights persistent wage-driven pressures heading into 2026.

Meanwhile, the labour market continues to soften. The Unemployment Rate held at 6.4%, its highest level in 16 months after September’s upward revision. Despite this, the ECB is not expected to adjust its message. Recent comments from Governing Council member Joachim Nagel reaffirm that inflation “now fluctuates around the target”, reinforcing the outlook for a prolonged period of stable interest rates.

In the United Kingdom, pressure is mounting on the Pound Sterling after comments from Prime Minister Keir Starmer stressing the need to bring inflation and interest rates lower to stimulate investment. Markets are now broadly expecting a rate cut at the next Bank of England (BoE) meeting, amid signs of a cooling labour market and slowing price growth. 

However, policymaker Megan Greene added a note of caution, stating she would only support rate cuts if employment and consumption weaken further, which has prevented a steeper decline in the currency.