- Pound (GBP) fell despite hotter CPI data
- BoE pressurized to hike aggressively
- Euro (EUR) rose after inflation downwardly revised
- German wholesale inflation is due
The Pound Euro (GBP/EUR) exchange rate is holding steady after small losses in the previous session. The pair fell -0.09% yesterday, settling at €1.1472 after trading in a range between €1.1451 – €1.1523 across the session. At 05:45 UTC, GBP/EUR trades +0.01% at €1.1473
The pound fell in the previous session after inflation rose back into double digits. UK inflation, as measured by the consumer price index, rose to 10.1% a year in September, up from 9.9% in August. Analysts had expected a rise to 10%.
Soaring food prices were a key driver for inflation and are expected to keep CPI rising until October when it is broadly expected to peak.
The data highlights the deepening cost of living crisis and the squeeze on household incomes, which is likely to be reflected in slowing consumer spending.
The higher-than-expected inflation adds pressure to the Bank of England to raise interest rates more aggressively in the November meeting, with a 1% hike a possibility. A large rate hike will put households under further pressure, but leaving inflation unchecked is the bigger risk.
Looking ahead, there is no high-impacting economic data from the UK to be released. Investors will continue digesting the latest economic data and the government’s most recent moves.
The euro fell after eurozone inflation rose by less than initially feared in September. Inflation rose to 9.9% year on year, a record high, and up from 9.1% recorded in August. The preliminary reading pointed to a rise to 10% annually.
Even so, the European Central Bank is likely to raise interest rates by 75 basis points when they meet next week. Much of the inflationary pressure is coming from energy costs, which look unlikely to fall any time soon.
Looking ahead German PPI data will be in focus and is expected to cool slightly to 44.7% year on year, down from 45.8%.