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Market Analysis

August sees the EUR/GBP remain below 0.8450 as UK CPI inflation remains stable at 2.2% YoY
Amos Simanungkalit · 20.8K Views

15

The EUR/GBP pair loses its recovery momentum around 0.8445 during early trading in the European session on Wednesday, as the Pound Sterling (GBP) strengthens following the release of UK inflation data. Attention is now shifting towards the Eurozone's Harmonized Index of Consumer Prices (HICP) data, set to be released later today.

According to the UK Office for National Statistics, the Consumer Price Index (CPI) rose by 2.2% year-on-year in August, aligning with both market expectations and the previous reading. Meanwhile, the core CPI, which excludes food and energy, surged by 3.6% YoY in August, up from 3.3% in July and slightly above the anticipated 3.5%. This stronger-than-expected data gave GBP a boost in the immediate aftermath of the report.

Looking ahead, the Bank of England (BoE) will announce its interest rate decision on Thursday. While the central bank is expected to hold rates steady, it is anticipated to adopt a more aggressive stance starting in November. Although the likelihood of a 25 basis points (bps) rate cut in September has increased, it remains relatively low at around 35%, according to data from LSEG.

On the Euro side, European Central Bank (ECB) Governing Council member Martins Kazaks stated on Monday that the ECB will continue easing monetary policy, but cautioned against acting too quickly due to persistent inflation risks. A less dovish tone from ECB officials could help limit the Euro's losses against GBP.

The upcoming Eurozone HICP inflation data may provide insights into the inflation outlook and influence the ECB's next policy moves. Expectations are for the HICP to rise by 2.2% YoY in August, with the core HICP forecast to increase by 2.8%.

 

 

 

 

 

 

Paraphrasing text from "FX Street" all rights reserved by the original author.

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