- Pound (GBP) is unchanged after losses yesterday
- UK CPI cooled to 3.4% YoY from 3.5%
- Euro (EUR) holds yesterday’s gains
- Eurozone inflation cooled to 1.9% YoY
The Pound-Euro (GBP/EUR) exchange rate is unchanged after falling yesterday. The pair fell -0.41% in the previous session, settling on Tuesday at €1.1695. It traded between €1.16887 and €1.1752. At 17:30, GBP/EUR trades 0.01% at €1.1698.
The pound is holding on to yesterday’s losses amid a cautious market mood. The Iran-Israel conflict continues, and UK inflation cooled less than expected.
The latest data from the Office of National Statistics showed that the consumer price index was 3.4% year over year in May, down from 3.5% in April. Meanwhile, service sector inflation, a metric which the Bank of England is watching closely, cooled by more than expected, dropping to 4.7% from .4% in April.
While inflation is moving in the right direction, it’s still too high for the Bank of England to be comfortable. The central bank is expected to leave interest rates unchanged at 4.25% in tomorrow’s meeting. Last month, the Bank of England cut rates by 25 basis points, but the minutes of the meeting showed a sharp division between the nine policymakers over the threat from inflation.
The euro was unchanged today as it hovers at a three-week high against the pound. Data today from the region confirmed that inflation in the eurozone had eased to 1.9% annually in May in line with the preliminary reading. This is below the ECB’s 2% target and is down from 2.2% in April.
The data comes as the ECB cut rates by 25 basis points for an eighth time in the June meeting and investors are now pricing in a pause to rate cuts in July to give the bank a chance to reassess the uncertainty of the outlook.
ECB policymaker Robert Holzman said the ECB should pause rates until at least September, while Isabel Schnabel, another policymaker, warned of potential shocks that could bring new challenges.
