The EUR/GBP exchange rate surged to nearly 0.8380 during Wednesday’s European session, buoyed by the release of the United Kingdom’s Consumer Price Index (CPI) report for September. The data indicated a slower-than-anticipated increase in price pressures, fostering optimism about potential interest rate cuts by the Bank of England (BoE) in the coming months.
The CPI report revealed that annual headline inflation eased to 1.7%, falling short of the BoE’s target of 2%. Month-on-month, the headline CPI remained unchanged, aligning with forecasts of minimal growth. In addition, the annual core CPI—excluding volatile items—rose by 3.2%, below the expected 3.4% and down from the previous figure of 3.6%.
Inflation in the services sector also exhibited a notable slowdown, attributed to reduced wage growth. The service inflation rate increased by 4.9%, down from 5.6% in August, a key metric closely monitored by BoE officials.
The Pound Sterling (GBP) has been struggling against its major counterparts, particularly following comments made by BoE Governor Andrew Bailey in an interview with The Guardian. His remarks hinted at a more dovish stance on the interest rate outlook, suggesting the BoE could adopt a “more activist” and “aggressive” approach to rate cuts if favorable inflation news continues, as reported by Reuters.
On the Euro (EUR) side, investors are looking forward to a speech by European Central Bank (ECB) President Christine Lagarde, scheduled for 19:40 GMT, which is expected to provide insights into interest rate policy. Given the recent sharp deceleration in price pressures across the Eurozone, Lagarde’s comments may also lean towards a dovish perspective.
Revised estimates for France indicate that the annual CPI (EU norm) fell to 1.4% in September, below both expectations and prior estimates of 1.5%.
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