- Pound (GBP) is rising after losses yesterday
- UK CPI remained at 3.8% YoY in August
- Euro (EUR) falls as eurozone inflation is revised lower
- ECB may not cut rates further
The Pound-Euro (GBP/EUR) exchange rate is rising, recovering some of yesterday’s losses. The pair fell 0.54% in the previous session, settling on Tuesday at €1.1501. It traded between €1.1496 and €1.1569. At 15:00 UTC, GBP/EUR trades 0.25% at €1.1527.
The pound is rising on Wednesday, recovering yesterday’s losses after data showed UK inflation remained well above the Bank of England’s 2% target level in August.
Figures from the Office for National Statistics showed that inflation remained at 3.8% year on year in August, it’s the highest level among major economies and a 19-month high. Meanwhile, service sector inflation, which is closely watched by the Bank of England, slowed to 4.7% down from 5% in July, but this is still too high to be consistent with the central bank’s 2% target.
Many firms have raised prices after the increase in social security contributions and the hike in the minimum wage, which came into effect in April.
The data has cemented expectations that the Bank of England will leave interest rates unchanged in the meeting tomorrow at 4%. With inflation sticky and wage growth, there are doubts over the Bank of England’s ability to cut rates again this year.
The euro is under pressure after the eurozone inflation was cooler than initially expected in August. The consumer price index was downwardly revised to 2% last month from the initial reading of 2.1%.
Delving deeper into the data, the lowest annual rates for inflation were seen in Cyprus, 0%, and France, 0.8%, whilst the highest annual rates were recorded in Romania, 8.5%, and Estonia, 6.2%.
The data comes after the ECB left interest rates unchanged in the meeting last week, and amid growing doubts over whether the central bank will cut rates again, given that inflation is in line with forecasts and after ECB president Christine Lagarde said that the disinflationary process is over.