Market Analysis

The EUR/GBP currency pair has surged to nearly 0.8380 during Wednesday’s European trading session, following the release of the United Kingdom's Consumer Price Index (CPI) report for September. This report revealed that inflation pressures are easing more than anticipated.

The signs of moderating inflation have sparked expectations for further interest rate cuts by the Bank of England (BoE) as the year progresses. The CPI data indicated that annual headline inflation fell to 1.7%, below the BoE's target of 2%. The month-on-month headline CPI remained unchanged, which was expected. Meanwhile, the annual core CPI, which excludes volatile items, increased by 3.2%, falling short of the estimated 3.4% and down from the previous figure of 3.6%.

Additionally, inflation within the services sector has significantly slowed, attributed to lower wage growth. Service inflation, a key indicator for BoE officials, rose by 4.9%, down from 5.6% in August.

The Pound Sterling (GBP) has been lagging against other major currencies, particularly following a recent interview with BoE Governor Andrew Bailey, who expressed a somewhat dovish outlook on interest rates. Bailey mentioned that the BoE could adopt a more proactive stance in lowering rates if there were more favorable developments regarding inflation, according to Reuters.

On the Euro (EUR) side, market participants are looking forward to a speech by European Central Bank (ECB) President Christine Lagarde for further insights into interest rate policy, scheduled for 19:40 GMT. Analysts expect Lagarde's comments may lean dovish, given that inflationary pressures in the Eurozone have also significantly decreased in September.

Revised estimates indicate that annual CPI (EU norm) in France slowed to 1.4% in September, down from both previous estimates and expectations of 1.5%.

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