Pound-Euro could remain sensitive to the Bank of England’s guidance, with Sterling lacking support after inflation data failed to shift rate expectations.
The Pound Euro (GBP/EUR) exchange rate was subdued on Wednesday as the UK’s latest inflation figures failed to boost Sterling.
At the time of writing, GBP/EUR was trading at €1.1667, marginally down on the day.
Pound to Euro (GBP/EUR): 1.167193 (-0.04%)
Euro to Dollar (EUR/USD): 1.1467 (-0.61%)
DAILY RECAP:
The Pound (GBP) stumbled at the start of Wednesday’s session, despite the UK’s latest consumer price index showing that inflation accelerated in August.
Headline CPI rose from 2.9% to 3.1%, while core inflation held steady at 2.6%, with both measures printing in line with forecasts.
This failed to move the needle on Bank of England (BoE) interest rate bets ahead of the bank’s policy announcement on Thursday.
Markets still expect the BoE to leave policy untouched, leaving GBP lacking support in the wake of the CPI.
Meanwhile, the Euro (EUR) initially rose against the Pound on Wednesday following the UK’s inflation figures, but the common currency struggled to sustain its upside.
The Eurozone’s latest industrial production figures did little to help.
Although output contracted at a slower pace than expected in July – printing at -0.1% rather than -0.2% – June’s data was revised down to show a surprise 0.1% decline.
Following the data, the common currency trimmed its earlier gains against the Pound, which were already modest to begin with.
Near-Term GBP/EUR Forecast: BoE Decision Takes Centre Stage
Looking ahead, Thursday’s focus will be on the Bank of England’s latest interest rate decision.
With no change in policy expected, attention is likely to centre on the Monetary Policy Committee’s (MPC) guidance for the months ahead.
The MPC remains sharply split, potentially leaving the Pound vulnerable to swings.
A cautious stance from the majority could put pressure on Sterling, while signs that policymakers are becoming more hawkish could lend the currency support.
Meanwhile, the Eurozone’s final inflation figures for August could lend EUR modest support if they confirm a sharp rise in inflation last month.
However, movement may be limited unless the data deviates from the preliminary estimate.
Our currency coverage draws on live market data, official economic releases and published bank research.
