Home » GBP » GBP to EUR » Pound Euro Exchange Rate to Plunge Further on Hawkish ECB Speech?

Pound Euro Exchange Rate to Plunge Further on Hawkish ECB Speech?

Pound Coin on Euro Banknote GBP/EUR

GBP/EUR Exchange Rate Plummets as UK Inflation Falls Further than Expected

The Pound Euro (GBP/EUR) exchange rate is dropping this morning in the wake of softer-than-expected UK inflation data. Despite remaining in the double digits, headline CPI slipped to 10.1%.

At time of writing the GBP/EUR exchange rate is around €1.1262, a 0.66% fall from this morning.

Pound (GBP) Plunges on Softer-than-Expected Inflation

The Pound is under heavy selling pressure this morning as the latest headline CPI reading came in lower than forecasted. Dropping to 10.1% against an expected 10.3% has seen rate hike bets tempered.

A third consecutive month of falling inflation sees inflation in the UK at the lowest level since September last year as falling fuel prices contributed the biggest slide. On a monthly basis, CPI dropped by 0.6%, the largest single monthly drop since January 2019, and the first decline in a year.

Equally concerning for Sterling investors is the easing of core CPI, which excludes volatile food and energy prices. The figure slipped to 5.8% YoY, against an expected 6.2%, highlighting a further easing of price pressures.

With inflationary pressures finally easing, the millions of UK households under the living cost squeeze will be sighing with relief, but GBP investors won’t be. After the Bank of England (BoE) admitted that future monetary policy will be data-dependent, softer-than-expected inflation and mixed employment data could pare rate hike bets.

Looking ahead, the Pound could find some reprieve if a speech from BoE Chief Economist Huw Pill reassures investors. The first speech from the central bank after the CPI reading could boost Sterling if Pill alludes to continuing interest rate hikes in their fight on bringing inflation down.

Euro (EUR) Supported by Jumbo Rate Hike Bets

Meanwhile, the Euro (EUR) is enjoying a resurgence against many of its peers on Wednesday as investors are buoyed at the prospect of further jumbo rate hikes from the European Central Bank (ECB). However, the prospect of further hikes from the Federal Reserve could be capping any further gains for the Euro.

With recession fears now finally subsiding, the Euro is gathering strength on hopes of further bold interest rate increases from the ECB. Looking ahead to the rest of the session, a speech from ECB President Christine Lagarde could bolster the single currency. If Lagarde maintains her hawkish rhetoric, the Euro could climb higher on increased rate hike bets.

Comments are closed.