Pound Euro Exchange Rate Forecast: GBP/EUR Tumbles as UK Inflation Misses BoE Target

October 17, 2024 - Written by Tim Boyer

STORY LINK Pound Euro Exchange Rate Forecast: GBP/EUR Tumbles as UK Inflation Misses BoE Target

The Pound Euro (GBP/EUR) exchange rate took a tumble on Wednesday morning after a weaker-than-expected UK consumer price index saw markets increase bets on more Bank of England (BoE) interest rate cuts.

At the time of writing, GBP/EUR traded at €1.1946, down 0.5% from the morning’s opening levels.

The Pound (GBP) tumbled on Wednesday after a weaker-than-expected UK CPI reading intensified speculation about further interest rate cuts by the Bank of England.

September's data revealed that headline inflation dropped sharply from 2.2% to 1.7%, rather than the predicted 1.9%. This was the first time inflation has fallen below the BoE’s 2% target in more than three years.

Additionally, core inflation also slowed more than anticipated, decreasing from 3.6% to 3.2%, instead of the forecast 3.4%.

This latest data led markets to increase bets on consecutive BoE interest rate cuts in November and December, thereby putting significant pressure on the Pound.

Meanwhile, the Euro (EUR) remained subdued on Wednesday, potentially capping its gains against the Pound, ahead of the European Central Bank’s (ECB) interest rate decision on Thursday.

With the ECB's monetary policy announcement imminent, Euro investors were hesitant to adjust their positions in the common currency.

Despite this, the Euro managed to appreciate against the struggling Pound, further supported by a risk-averse market sentiment that favoured the safer single currency over its riskier UK rival.

Looking forward, the GBP/EUR exchange rate might reclaim some territory on Thursday when the ECB reveals its latest interest rate decision.

As the bank is expected to implement its third rate cut of the year and possibly hint at further easing, the Euro could come under significant selling pressure. This could enable the Pound to recover some of Wednesday's losses against the Euro on Thursday.

However, Sterling might face another setback on Friday with the release of the UK's September retail sales data. With UK sales growth forecast to have declined by 0.3% last month, the Pound could end the week on a downbeat note.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts