GBP/EUR exchange rate ticks lower following Eurozone CPI
The pound euro (GBP/EUR) exchange rate is on the back foot this morning following the publication of the Eurozone’s latest inflation print.
At the time of writing, GBP/EUR is trading at around €1.1846, down roughly 0.2% from this morning’s opening levels.
Euro (EUR) buoyed by inflation data
The euro (EUR) is enjoying some modest support this morning following the publication of the Eurozone’s preliminary consumer price index (CPI).
Both headline and core inflation printed hotter-than-expected in July, with headline inflation rising from 2.5% to 2.6% rather than falling to 2.4% as expected, while core inflation held steady at 2.9% rather than edging down to 2.8% as forecast.
As the Eurozone’s inflation level moves seemingly further away from the European Central Bank’s (ECB) 2% target, this has dampened bets the ECB may cut interest rates again in September and is underpinning the common currency this morning.
Franziska Palmas, senior Europe economist at Capital Economics, a consultancy, said:
‘While the fall in services inflation means a rate cut in September is still more likely than not, it is not a done deal.’
Pound (GBP) undermined by BoE rate cut bets
The pound (GBP) is struggling to garner investor attention this morning, hobbled by an increase in Bank of England (BoE) interest rate cut speculation ahead of the bank’s impending decision.
In the run up to August’s interest rate decision, investors have been evenly split on the possibility of a 25-basis point cut, however, some last-minute bets have seen the odds rise to around 60% in favour of a rate cut tomorrow, ultimately undermining Sterling sentiment this morning.
Ranjiv Mann, a portfolio manager at Allianz Global Investors commented:
‘Market expectations for a rate cut have been ticking up, I think it’s a disinflation narrative. There’s been underwhelming data from Europe and that has tipped the balance in favour of a BoE rate cut this week.’
Pound euro exchange rate forecast: Fed rate decision to infuse volatility into the euro?
Ahead of the Bank of England’s interest rate decision tomorrow, the Federal Reserve will deliver its latest rate decision this evening, which could infuse volatility into GBP/EUR exchange rates on the back of the euro’s negative correlation with the US dollar (USD).
As the Fed are widely expected to keep rates on hold this evening, any dovish forward guidance surrounding a potential September rate cut could see USD plummet and EUR surge.
Staying with the euro, tomorrow will see the publication of the Eurozone’s latest unemployment reading for June. As unemployment is forecast to remain at a historic low of 6.4%, this is likely to stymie the common currency towards the end f the week.
Looking at the pound, all eyes will be on the BoE upcoming interest rate decision, with the pound set to tumble should the bank cut rates from 16-year highs.