Pound Sterling Update: GBP to EUR Rate Flat despite cooling Eurozone Inflation

October 2, 2024 - Written by John Cameron

STORY LINK Pound Sterling Update: GBP to EUR Rate Flat despite cooling Eurozone Inflation

The Pound to Euro (GBP/EUR) exchange rate traded sideways on Tuesday morning leaving the pairing just below the 29-month high struck on Monday.

At the time of writing, GBP/EUR was trading at approximately €1.2009, showing little movement from Tuesday’s opening levels.

The Euro (EUR) wad muted on Tuesday following the release of the Eurozone’s latest consumer price index.

September’s preliminary CPI figures report inflation in the bloc dropped to 1.8%, down from 2.2% in August, and below forecasts it would only drop to 1.9%.

This also marked the first time inflation had fallen below the European Central Bank’s (ECB) 2% target since June 2021.

However, as investors had already factored in the possibility of an ECB rate cut later this month, particularly after weaker-than-expected inflation data from Germany, the downside for the Euro on Tuesday morning was limited.

The Pound (GBP) was also subdued on Tuesday as data confirmed that growth in the UK’s manufacturing sector slowed to a three-month low in September.

S&P Global’s latest survey showed that the UK manufacturing PMI dropped from 52.5 to 51.5, in line with its preliminary reading.

The data highlighted a worsening outlook for UK manufacturers, with business optimism hitting its lowest point in nine months due to uncertainties surrounding the upcoming Autumn Budget.

Additionally, the Pound was undermined by concerns over rising energy costs, as the UK’s energy price cap increased by 10% in October, sparking fears that this could soften consumer spending through the winter.

Looking forward, Euro investors will turn their attention to speeches from several ECB policymakers on Wednesday for clues on future monetary policy.

Among these, comments from ECB Vice-President Luis de Guindos are likely to be closely watched, with any hints towards a potential rate cut in October possibly weakening the Euro.

Meanwhile, with little in the way of significant UK economic data, the Pound is likely to be influenced by broader market sentiment. If investors remain cautious, this could put additional pressure on Sterling during mid-week trading.

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TAGS: Pound Euro Forecasts