The Pound-Euro could extend gains if UK inflation reinforces BoE hike bets, while French fiscal risks may continue to weigh on the Euro.
The Pound Euro (GBP/EUR) exchange rate climbed on Tuesday as an unexpected fall in UK unemployment boosted Sterling.
At the time of writing, GBP/EUR was trading at €1.1896, up 0.3% on the day.
Pound to Euro (GBP/EUR): 1.190217 (+0.28%)
Euro to Dollar (EUR/USD): 1.12176 (+0.03%)
DAILY RECAP:
The Pound (GBP) attracted support at the start of Tuesday’s session as markets reacted to the latest UK labour market overview.
New data showed that British unemployment unexpectedly fell in the three months to August, dropping from 4.9% to 4.7% – its lowest level in over a year.
The stronger-than-expected release boosted bets that the Bank of England (BoE) will raise interest rates to tame inflation. Market odds for a November hike were around 95.5% following the jobs data, with three further rate increases expected in 2027.
Meanwhile, the Euro (EUR) faced pressure on Tuesday as the common currency was left to contend with some downbeat German data.
Germany’s ZEW economic sentiment index deteriorated more than expected in October, dropping from 34.7 to 28.1, missing forecasts for a score of 30.
Weakening morale in the Eurozone’s largest economy weighed on the Euro, especially when paired with the ongoing political and fiscal turmoil in France – the bloc’s second-largest economy. As a result, EUR exchange rates weakened.
Near-Term GBP/EUR Forecast: UK Inflation to Boost BoE Bets and Lift the Pound?
Looking forward, Wednesday’s session kicks off with the UK’s September consumer price index, which could lend Sterling support.
Markets expect headline inflation to have accelerated from 3.1% to 3.4% last month, while core inflation is forecast to rise from 2.6% to 2.8%. Paired with Tuesday’s upbeat employment data, the CPI figures could fuel bets on a stronger approach from the Bank of England moving forward.
A speech from BoE Governor Andrew Bailey in the afternoon could reinforce the Pound’s gains, if he strikes a hawkish tone.
European Central Bank (ECB) President Christine Lagarde is also due to speak tomorrow, with her remarks potentially impacting the Euro.
However, EUR investors may be more focused on the situation in France, with concern
Our currency coverage draws on live market data, official economic releases and published bank research.
