– Written by
Frank Davies
STORY LINK Pound-to-Euro Rate Holds 1.16 Ahead of Crucial BoE Decision
The Pound Euro (GBP/EUR) exchange rate remained subdued on Wednesday, with the latest UK inflation figures doing little to strengthen Sterling.
At the time of writing, GBP/EUR was trading at €1.1672, having wavered in a narrow range.
The Pound (GBP) came under pressure at the beginning of Wednesday’s session, even as the latest UK consumer price index revealed a further acceleration in inflation during August.
Headline CPI increased from 2.9% to 3.1%, while core inflation remained at 2.6%.
Both figures matched market expectations, leaving the data with little impact on expectations for Bank of England (BoE) monetary policy.
With the BoE still widely expected to keep interest rates unchanged at Thursday’s policy meeting, the inflation figures did little to provide the Pound with fresh support.
However, Sterling recouped its modest losses as trade unfolded.
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The Euro (EUR) also struggled to build on its initial gains against the Pound on Wednesday, with the single currency edging higher after the UK inflation release before losing momentum.
Eurozone industrial production offered little encouragement.
Output fell by 0.1% in July, beating forecasts for a 0.2% contraction, but the June figure was revised lower to show an unexpected 0.1% decline.
The mixed figures prompted the Euro to surrender some of its earlier gains against the Pound, although the move higher had been relatively limited in the first place.
Near-Term GBP/EUR Forecast: BoE Decision in Focus
Looking to Thursday, the Bank of England’s upcoming interest rate decision is set to take centre stage.
While markets broadly anticipate no change in policy, the Monetary Policy Committee’s (MPC) messaging on the path ahead could prove more significant for Sterling.
The MPC remains deeply divided, meaning the Pound could be sensitive to shifts in policymakers’ tone.
A more cautious approach from the majority could drag on Sterling, whereas indications of a more hawkish outlook could provide some support for the currency.
For the Eurozone, the final inflation figures for August are due for release.
A confirmation of the sharp acceleration in inflation could offer the Euro some modest support, although the impact is likely to be limited if the figures simply match the preliminary reading.
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TAGS: Pound Euro Forecasts
