Pound volatility as all eyes on UK election

The EURGBP pair is extending its decline to near 0.8465 in early European trading on Thursday.

The Euro is edging lower as the softer Eurozone HICP inflation report prompted the expectation of interest rate cuts from the European Central Bank, while market players will closely monitor the UK general elections on Thursday.

The upcoming UK general elections might limit GBP movement ahead of the vote on Thursday before the results potentially trigger some volatility on the Pound Sterling on Friday.

Political analysts and surveys predict that Keir Starmer’s Labour will win more seats than the record 418 it won when ex-leader Tony Blair ended 18 years of Conservative control in 1997.

On the Euro front, the far right’s hopes of winning outright in the French election fell on Tuesday, as centrist and left-wing candidates reluctantly banded together to stop Marine Le Pen’s National Rally from seizing power for the first time, per Politico.

Additionally, the annual inflation rate in the Eurozone eased in June.

The Eurozone Harmonised Index of Consumer Prices (HICP) increased by 2.5% YoY in June, compared to a rise of 2.6% recorded in the previous month, according to preliminary estimates from Eurostat on Tuesday. This figure spurred the hopes for potential interest rate cuts by the ECB, which dragged the shared currency lower and created a headwind for EURGBP.

(Source: OANDA)