- Pound (GBP) steadies after steep losses
- CPI fell by more than expected
- Euro (EUR) rose after hawkish ECB comments
- More central bank speakers are due today
The Pound Euro (GBP/EUR) exchange rate is holding steady after losses yesterday. The pair fell 0.7% in the previous session, settling on Wednesday at €1.1249 after trading in a range between €1.1230 – €1.1345. At 05:45 UTC, GBP/EUR trades +0.03% at €1.1252.
The pound fell sharply in the previous session against both the euro under U.S. dollar after a stepper than expected slowdown in UK inflation, which eases pressure on the Bank of England to keep raising interest rates.
Inflation fell to a five-month low of 10.1% in January, down from 10.5% in December. Analysts had expected inflation to dip to 10.3%. This marked the third straight month where consumer prices continue to fall away from the 11.1% peak reached in October last year.
The faster-than-expected fall in inflation suggests that consumers are reining in spending, which will take some pressure off the UK central bank to keep hiking interest rates. The BoE is expected to raise interest rates by 25 basis points, but this data puts that decision on a knife edge.
Today there is no high-impacting economic data; investors will be looking towards a speech from chief economist Huw Pill for further cues on the future path of rate hikes.
The euro rose in the previous session despite industrial production falling much more steeply in December than analysts had forecast. industrial output fell 1.1% month on month, worse than the -0.8% decline forecast.
Meanwhile, comments from European Central Bank president Christine Lagarde helped to support the euro. Lagarde said that even though most longer-term inflation expectations measure inflation at below 2%, she still intends to raise interest rates by 50 basis points at the upcoming March meeting. She said that price pressures remain strong an inflation remains high.
The eurozone economic calendar is light today. Instead, there are several ECB policymakers who are due to speak.