Pound euro exchange rate weakens on cooling UK CPI
The pound euro (GBP/EUR) exchange rate is slipping this morning following the publication of the UK’s latest inflation data.
At the time of writing, GBP/EUR is trading at around €1.1653, down roughly 0.4% from this morning’s opening levels.
Pound (GBP) undermined by inflation data
The pound (GBP) is facing fresh selling pressure against the majority of its peers this morning following the publication of the UK’s latest consumer price index (CPI).
The UK’s headline inflation reading came in cooler-than-expected in July, with the figure rising from a previous reading of 2% up to 2.2%, missing forecasts of a slightly larger increase to 2.3%.
Core inflation also cooled more than expected in July, with the index falling from 3.5% to 3.3% rather than a more modest 3.4% expectation.
Further signs of cooling inflation within the UK’s services sector also highlighted July’s softening inflation figures, undermining GBP as a result.
The latest consumer price index has also served to ramp up Bank of England (BoE) interest rate cut bets this morning, with the odds of a November rate cut rising from 36% to 45% following the release.
Capital Economics commented:
‘Importantly for the Bank of England, the decline in services inflation from 5.7% to 5.2% was much bigger than anyone anticipated. That was well below the 5.6% rate forecast by the Bank in August, although closer to our own forecast of 5.4%.’
Euro (EUR) unmoved by several data releases
The euro (EUR) is trending mostly flat against the majority of its peers this morning as the common currency is largely unmoved by the publication of several domestic data releases.
The Eurozone’s latest industrial production index came in much lower than forecast this morning, with the index falling from a previous reading of -0.9 to -0.1 in June, rather than rising to 0.5% as expected.
However, despite the sector unexpectedly contracting again, EUR exchange rates have remained largely subdued following the publication.
The Eurozone’s preliminary employment change for the second quarter of 2024 printed in line with estimates this morning, increasing by 0.2% as expected.
However, once again, the euro has remained largely flat following the release.
Pound euro exchange rate forecast: UK GDP in the spotlight
Looking ahead, the primary catalyst of movement for the pound euro exchange rate looking to tomorrow will be the UK’s preliminary GDP estimate for the second quarter of 2024.
The quarter-on-quarter figure is forecast to marginally dip, expected to fall from quarter one’s 0.7% expansion down to 0.6% in quarter two.
As the estimate is forecast to remain at robust growth levels, Sterling sentiment could be buoyed should the data print as expected.
Turning to the euro, macroeconomic data releases will be absent for the remainder of this week, which could see the single currency trade without a clear direction.