Pound Euro (GBP/EUR) Exchange Rate Regains Upside after Inflation Releases
(Updated 13:20, 18/01/23) The Pound Euro (GBP/EUR) exchange rate caught fresh bids earlier this morning, with Sterling regaining the upside to hit a one-month high against the common currency.
The renewed bullish momentum for GBP/EUR came following the Eurozone’s final inflation rate reading. The headline figure confirmed a sharp slowdown in inflation last month from 10.1% to 9.2%. More significantly, the monthly rate revealed a larger-than-forecast decline, printing at -0.4% rather than -0.3%.
Paired with yesterday’s reports that the European Central Bank (ECB) is considering a slower pace of interest rate rises after its February meeting, the final CPI saw markets reprice ECB rate hike bets.
Earlier on, UK inflation showed signs of being stickier than expected. This boosted Bank of England (BoE) rate rise bets and supported the Pound (GBP).
As a result, markets are repositioning on the Pound and the Euro today, providing GBP/EUR with support.
At the time of writing, GBP/EUR is trading at €1.1424, slightly below a one-month high of €1.1444 hit earlier in the session.
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Pound Euro (GBP/EUR) Exchange Rate Stumbles amid Mixed UK Inflation Data
The Pound Euro (GBP/EUR) exchange rate has slipped this morning as the common currency seeks to regain some of yesterday’s losses. Meanwhile, markets digest the UK’s latest consumer price index.
At the time of writing, GBP/EUR is trading at around €1.1364, having fallen from a one-month high of €1.1409.
Euro (EUR) Stages Modest Recovery
The Euro (EUR) jumped higher against the Pound (GBP) as today’s European trading session began, with the single currency regaining some of the ground it lost yesterday.
After a strong economic sentiment reading from Germany boosted EUR on Tuesday morning, the Euro then slumped in the afternoon. A report from Bloomberg claimed that the European Central Bank (ECB) may slow its pace of policy tightening after next month’s decision.
The common currency seemed to have entered oversold conditions, allowing it to recover somewhat against the Pound this morning. With EUR/GBP hitting a one-month low, savvy traders looked to pick up a bargain.
Aiding the Euro’s rise is a sharp decline in the US Dollar (USD). As EUR is negatively correlated with USD, this fall in the ‘Greenback’ is lifting the single currency.
Pound (GBP) Mixed following UK Inflation
Meanwhile, the Pound is rather mixed today following the UK’s latest consumer price index.
Headline inflation eased from 10.7% to 10.5% in December, as expected. However, core inflation held at 6.3%, though economists had expected it to cool slightly. While the latest CPI does seem to suggest that UK price pressures have peaked, it also indicates that inflation is proving persistent.
With headline inflation still in double digits, the Bank of England (BoE) may choose to continue raising interest rates. Rate hike bets often support the respective currency, but the upside for the Pound seems limited amid growing concern about the UK economy.
Rising rates and high inflation mean tougher financial conditions for British households and businesses, who are already struggling amid the cost-of-living crisis. Intensifying industrial action and Brexit woes add to the country’s economic headwinds.
Pound Euro Exchange Rate Forecast: Ukraine Worries to Dent EUR?
Looking ahead, Russia-Ukraine news could impact the Euro through today’s session. There are growing signs that the Kremlin is preparing to launch a fresh ground offensive into Ukraine, perhaps using Belarus to stage an attack on the capital Kyiv. Any signs of further escalation could weigh on the single currency.
As for the Pound, we may see more movement in Sterling as markets digest the UK CPI and its implications for monetary policy. Could GBP reclaim this morning’s lost ground on BoE rate rise bets?
Additionally, risk appetite could impact GBP/EUR. If the market mood remains upbeat it may support the riskier Pound over the safer Euro.