- Pound (GBP) is unchanged after gains yesterday
- UK CPI is expected to cool to 3.6%
- Euro (EUR) is unchanged after losses yesterday
- Eurozone inflation is expected to confirm 2.1% YoY in October
The Pound-Euro (GBP/EUR) exchange rate is unchanged after gains yesterday. The pair rose 0.12% in the previous session, settling on Monday at €1.1349. It traded between €1.1311 and €1.1375. At 15:00 UTC, GBP/EUR trades 0.01% at €1.1350.
The pound is unchanged on Tuesday amid a cautious market mood and as investors look ahead to tomorrow’s inflation data.
Expectations are for inflation to ease to 3.6% year on year in October, down from 3.8% in September, suggesting inflation has peaked. This would have been below the 4% high the Bank of England was expecting, suggesting that fears of sticky inflation may have also finally peaked.
Expectations surrounding the expected pace at which inflation could cool is creating divisions within the BoE monetary policy committee. Some policymakers expect a slow pace, while others see a faster return to the BoE’s 2% target.
The data comes after weaker-than-expected UK labour market data and cooler-than-expected Q3 growth. This could encourage the Bank of England to cut interest rates by 25 basis points in the December meeting.
The euro was broadly unchanged today amid a quiet economic calendar. Investors were opting to sit on the sidelines ahead of eurozone inflation figures tomorrow.
The data is expected to confirm that the eurozone CPI eased to 2.1% year on year in October, as in the preliminary reading.
The data would support the view that the European Central Bank has completed its rate-hiking cycle. The central bank has left rates unchanged for the past three meetings.
With inflation more or less at target, the focus will be on growth. Eurozone PMI data is due at the end of the week and will provide timely clues on activity levels.
In October, the composite PMI, a good gauge of business activity, rose to a 17-month high.
