Pound Euro Exchange Rate News: GBP/EUR Firms as UK Inflation Remains Elevated

September 19, 2024 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Firms as UK Inflation Remains Elevated

The Pound to Euro (GBP/EUR) exchange rate rebounded on Wednesday, as markets digested the UK’s latest consumer price index.

At the time of writing, GBP/EUR was hovering around €1.1872, marking a roughly 0.3% increase from the day's opening figures.

Pound (GBP) Boosted by Strong UK Inflation Data

The Pound (GBP) strengthened on Wednesday, after the Office for National Statistics (ONS) published the UK’s latest inflation figures.

August's CPI figures revealed that headline inflation held steady at 2.2%, while core inflation, which excludes volatile items like energy and food, accelerated from 3.3% to 3.6%.

Additionally, persistent inflation in the services sector, an area closely monitored by the Bank of England, suggests that the BoE is unlikely to be in any rush to loosen its monetary policy further.

This further reduced expectation for an imminent rate cut from the BoE and provided further support for the Pound.

Euro (EUR) Under Pressure Amid Weak Eurozone Inflation

In contrast, the Euro (EUR) was placed under pressure on Wednesday after the release of the Eurozone's own inflation figures.

August’s finalised figures confirmed inflation in the bloc cooled from 2.6% to a three-year low of 2.2%, reinforcing expectations of further easing from the European Central Bank (ECB).

This comes alongside comments from ECB policymakers François Villeroy de Galhau, who indicated that the bank might continue easing its monetary policy in the near future.

These factors have contributed to growing bets on ECB rate cuts, which have weighed on the Euro.

GBP/EUR Outlook: BoE Decision to Offer Further Support to the Pound?

Looking ahead, the Pound Euro exchange rate could continue to gain momentum if the Bank of England's upcoming interest rate decision is perceived as hawkish.

While the BoE is widely expected to leave rates unchanged this month and this has been largely priced in by investors, Sterling may still strengthen if the bank’s forward guidance suggests that policymakers are in no rush to continue cutting interest rates.

Meanwhile, EUR investors will be paying close attention to comments from ECB President Christine Lagarde in the second half of the week. If Lagarde strikes a dovish tone, the Euro could face further selling pressure, allowing the GBP/EUR exchange rate to climb even higher.

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TAGS: Pound Euro Forecasts