Pound euro exchange rate flat despite cooling Eurozone inflation
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning following the publication of the Eurozone’s latest inflation reading.
At the time of writing, GBP/EUR is trading at around €1.2006, virtually unchanged from this morning’s opening levels.
Euro (EUR) undermined by domestic inflation
The euro (EUR) is on the back foot against the majority of its peers this morning following the publication of the Eurozone’s latest consumer price index (CPI).
The preliminary reading revealed that headline inflation cooled more than expected in September, with the index dropping from 2.2% to 1.8%, just behind a more modest 1.9% expectation.
Similarly, core inflation also cooled in September, with the index cooling from 2.8% to 2.7%, behind market expectations the reading would remain unchanged.
Following Germany’s inflation data published yesterday afternoon, which also cooled more than expected and reached 1.6%, this morning’s release has put further pressure on the euro as both German and Eurozone inflation dips below the European Central Banks (ECB) 2%target.
Cooling inflation within the bloc and its major economies has ramped up ECB interest rate cut bets in recent weeks, with this morning’s data acting as a catalyst for the current speculation.
As such, the common currency is struggling to garner investor attention thus far, further hobbled by an unclear market mood.
Pound (GBP) dips following PMI data
The pound (GBP) is on the defensive against the majority of its peers this morning as the UK published its latest manufacturing PMI data.
September’s finalised index printed in line with market expectations this morning and cooled from 52.5 to 51.5.
The data came in at the lowest level in over four years, with the downturn primary put down to fears over the UK’s upcoming Autumn Budget, however, the index also remained in the expansion zone (a reading above 50).
Rob Dobson, Director at S&P Global Market Intelligence commented:
‘The UK manufacturing sector is still expanding at a solid, albeit slightly slower, pace. However, manufacturers have become more nervous about the outlook, suggesting that the current spell of impressive growth is fading.
The extent of the drop in confidence was striking, beaten only by that seen in March 2020 prior to COVID lockdowns. Uncertainty about the direction of government policy ahead of the coming Autumn Budget was a clear cause of the loss of confidence, especially given recent gloomy messaging.’
Pound euro exchange rate forecast: Eurozone jobs data to buoy euro?
Looking ahead, the primary catalyst of movement for the pound euro exchange rate looking forward to tomorrow will likely be the publication of the Eurozone’s latest unemployment data.
Scheduled for release on Wednesday morning, the Eurozone’s unemployment rate is forecast to remain at record lows of 6.4% and could offer the single currency some modest support during mid-week trade.
Turning to the pound, UK data will be absent from tomorrow’s data calendar, and as such, could see GBP exchange rates trade without a clear tracery and in line with market risk appetite.