- Pound (GBP) is falling after losses yesterday
- UK CPI cooled to 3.2% YoY in November from 3.6%
- Euro (EUR) is rising but falling versus the USD
- Eurozone CPI remains near the 2% target at 2.1% YoY
The Pound-Euro (GBP/EUR) exchange rate is falling after gains yesterday. The pair fell rose 0.42% in the previous session, settling on Tuesday at €1.1428. It traded between €1.1365 and €1.1434. At 14:00 UTC, GBP/EUR trades -0.38% at €1.1385.
The pound is falling after data showed that UK inflation cooled further ahead of Thursday’s BoE rate decision.
UK inflation, as measured by CPI, eased to 3.2% year on year in November, down from 3.6% in October and below forecasts of 3.5%. Meanwhile, core inflation, which excludes more volatile items such as food and fuel slipped to 3.2% down from 3.4% in October and below 3.4% forecast.
The data reinforces expectations that the Bank of England will cut interest rates by 25 basis points at this week’s meeting and could be forced to cut rates further in 2026.
The market is fully pricing in two rate cuts next year, with a 72% probability of a 1/3 rate reduction before the end of 2026. This has pulled gilt yields lower, and has seen the pound tumble against its major peers.
The euro is rising against the pound but falling against the US dollar as investors digest inflation data. Eurozone inflation was 2.1% in November, reinforcing expectations that the ECB will keep interest rates unchanged this week.
Today, inflation was slightly lower than the EU statistics agency’s initial estimate, which showed inflation ticking up to 2.2%. Meanwhile, core inflation, which strips out volatile items such as energy and food and is closely watched by the ECB and analysts, was confirmed at 2.4%, unchanged from October.
The data support the view that eurozone inflation remains in check, boosting the likelihood that the ECB will leave interest rates unchanged at its policy meeting on Thursday. The ECB has kept interest rates at 2% since July and is likely at the en of its rate cutting cycle.
