The pound sterling and the euro traded in tight ranges on Wednesday, with GBP/EUR holding just above a year-to-date low as markets largely shrugged off hotter-than-forecast UK inflation figures.
Pound to Euro (GBP/EUR): 1.14815 (+0.17%)
Pound to Dollar (GBP/USD): 1.34107 (-0.22%)
Euro to Dollar (EUR/USD): 1.16803 (-0.39%)
DAILY RECAP:
The Pound (GBP) was subdued on Wednesday as investors looked past the UK’s hotter-than-expected consumer price index.
Headline inflation rose to 3.4% in December from 3.2%, exceeding expectations for a smaller increase to 3.3% and marking the first uptick in five months. While the rise cemented expectations that the Bank of England will keep rates on hold in February, it failed to materially alter views on rate cuts later in the year.
Much of the increase was driven by higher cigarette duties and seasonal air fare rises, while core inflation held steady at 3.2%. With underlying price pressures unchanged, Sterling’s reaction remained muted.
The Euro (EUR) also traded in a narrow range, as the recent US Dollar selloff that had supported the single currency appeared to lose momentum.
With USD stabilising, the Euro lost a key tailwind. Comments from European Central Bank President Christine Lagarde also kept EUR contained, after she downplayed the inflationary impact of new US tariffs, noting that inflation remains under control near target.
Near-Term GBP/EUR Forecast: ECB Signals and Eurozone Data in Focus
Looking ahead, Thursday brings the release of minutes from the European Central Bank’s most recent policy meeting. If the accounts show policymakers remain comfortable with the current rate stance, the Euro could find modest support.
Attention will also turn to the Eurozone’s consumer confidence index, where a forecast dip in January could weigh on EUR sentiment.
For the Pound, traders will be watching UK public sector borrowing figures and the CBI’s distributive trades survey. Signs of rising borrowing or continued weakness in retail conditions could pressure Sterling.
Broader geopolitical risks, including developments around Greenland, are also likely to remain a source of background volatility for the pair.
