EUR/GBP holds firm as markets eye Eurozone, UK CPI and Lagarde's remarks

• EUR/GBP trades with a firm tone near 0.8640 as markets brace for CPI data from the Eurozone and UK due Wednesday.
• Risk sentiment improves after Monday’s Trump-Zelenskyy summit fuels hopes of Ukraine peace progress.
• ECB President Lagarde’s speech on Wednesday could provide fresh forward guidance on inflation and policy.

The Euro (EUR) is trading with a steady tone against the British Pound (GBP) on Tuesday, with the EUR/GBP cross hovering below the 0.8650 psychological mark at the start of the American session. Investors are trading with caution ahead of Consumer Price Index (CPI) reports due Wednesday from both the Eurozone and the United Kingdom (UK), which could set the tone for central bank expectations into September.

At the time of writing, EUR/GBP is trading around 0.8640, building on modest gains from Monday’s rebound after finding bids just above the 0.8600 support area.

The Euro is drawing fresh support from improved risk sentiment following Monday’s high-level White House summit between US President Donald Trump, Ukrainian President Volodymyr Zelenskyy, and top European leaders. Though markets welcomed signs of diplomatic coordination, the absence of a concrete ceasefire agreement kept investors cautious. Still, optimism over a potential breakthrough in Ukraine peace efforts lifted European equities, with the pan-European STOXX 600 index climbing to a six-month high.

President Trump hinted at plans for a potential trilateral summit with Russian President Vladimir Putin and President Zelenskyy, signaling the next stage of diplomatic engagement. This evolving geopolitical backdrop is offering a tailwind to the common currency, even as attention shifts to key inflation data due midweek.

In the UK, the headline Consumer Price Index (CPI) is expected to decline 0.1% MoM in July, following a 0.3% increase in June. On an annual basis, CPI is forecast to rise to 3.7% YoY, slightly up from 3.6% in June. Core CPI, which strips out volatile components like food and energy, is seen unchanged at 3.7% YoY, suggesting inflation pressures remain sticky beneath the surface.

Across the Channel, Eurozone inflation is seen remaining stable. The Harmonized Index of Consumer Prices (HICP) is forecast to print at 2.0% YoY, unchanged from June. The monthly HICP reading is also expected to come in flat at 0.0%, suggesting price growth paused in July. Meanwhile, Core HICP YoY is projected to hold steady at 2.3%, in line with the previous month, while the Core HICP MoM previously declined by 0.2%, highlighting signs of easing in underlying price pressures.

Alongside the inflation figures, the UK will also release its Retail Price Index (RPI) for July, which could provide additional insight into consumer cost pressures across the broader economy. Meanwhile, traders will also keep a close eye on remarks from European Central Bank (ECB) President Christine Lagarde, who is scheduled to speak later on Wednesday.