The GBP to EUR exchange rate's upward momentum so far this year has faced significant resistance, hindering its progress in the latter half of May. However, the consolidation around the 1.15 level could see a breakthrough in either direction following the release of European inflation figures for April on Thursday.

Throughout last week, GBP remained relatively stable against the Euro.  GBP's advance faltered shortly after UK inflation figures for April were released, showing a smaller decline than expected.

The unexpected rise in UK Consumer Price Index (CPI) contributed to a sell-off in the bond market, which negatively impacted risk sentiment and weighed on Sterling. Michael Cahill, a G10 FX strategist at Goldman Sachs, noted that the substantial increase in UK CPI fuelled the selloff in government bonds, affecting GBP.

Derivative markets quickly adjusted to reflect a high probability of the BoE raising the Bank Rate to 5.5%, following the data released the previous week. The decline in April's inflation was attributed to earlier drops in energy prices. This was further supported by the core inflation rate, which rose from 6.2% to 6.8% as prices of domestically produced goods and services increased in various categories after the start of the financial year. Such price increases are precisely what the BoE has been attempting to prevent.

Rate expectations have steadily increased throughout the year, driven by official figures and private sector indicators suggesting greater resilience in the UK economy than initially anticipated. The BoE upgraded its forecasts this month, now projecting modest growth for 2023.

GBP/EUR is primarily focused on Europe's inflation figures this week, as UK economic data remains relatively limited. The likely outcome and market response are uncertain, especially if price pressures on the continent remain persistent.

Economists surveyed expect Europe's inflation rate to fall from 7% to 6.3% for April, with the core inflation rate edging lower from 5.6% to 5.5%.