- Pound (GBP) steadies after 5-days of losses
- UK CPI eased to 2.5% from 2.6%
- Euro (EUR) is steady after recent gains
- Eurozone industrial production slows
The Pound Euro (GBP/EUR) exchange rate is unchanged after five days of losses. The pair fell 0.50% in the previous session, settling on Tuesday at €1.1848. It traded in a range between €1.1823 and €1.1930. At 10:00 UTC, GBP/EUR trades -0.01% at €1.1847.
The pound is holding steady against the euro but rising modestly against the US dollar following cooler-than-expected UK inflation data.
UK CPI eased to 2.5% year on year in December, down from 2.6% in November and below a rise to 2.7% that economists expected. Meanwhile, service sector inflation, which is watched closely by the Bank of England, eased 4.4%, down from 5% in November and well below the 4.8% expected.
These figures will be well received by the Bank of England as they weigh up on whether to cut rates in the February meeting. The market has ramped up BoE rate cut expectations by 12 basis points to 49 basis points worth of rate cuts expected across 2025
However, the pound has hardly moved, as the market remains concerned about the UK’s growth prospects and stagflation in the coming months.
A recent BRC survey showed that 2/3 of retailers intend to pass on the increase in cost they will experience due to the hike in National Insurance contributions from the budget, which could fuel inflation.
UK GDP data is due tomorrow and could provide more information about the slowing growth story since labour came to power in July.
The euro is unchanged despite an upward revision to Spanish inflation. Spanish CPI rose 0.5% Month over Month in December, up from 0.4%. The data is unlikely to impact ECB rate cut expectations.
Eurozone industrial production was 0.2% month on month in November, which is in line with October but below forecasts of 0.3%.