- Pound (GBP) falls after a flat finish yesterday
- UK construction PMI fell for a 12th straight month
- Euro (EUR) is rising even as inflation rises
- Eurozone CPI cooled to 2% YoY from 2.1%
The Pound-Euro (GBP/EUR) exchange rate is falling after a flat finish yesterday. The pair fell -0.01% in the previous session, settling on Tuesday at €1.1551. It traded between €1.1541 and €1.1571. At 16:30 UTC on Wednesday, GBP/EUR trades -0.21% lower at €1.1527.
The pound is falling on Wednesday amid a relatively quiet economic calendar and sentiment-focused trading amid ongoing geopolitical uncertainty.
The only UK economic release was British construction activity data, which shows that output contracted for a 12th straight month in December, marking the longest such run in almost 2 decades.
The construction PMI for the sector came in at 40.1 in December, only marginally above its 5 1/2 year low of 39.4 in November. The drop marks at downtown, which has lasted 12 months and is the longest run of contractions since the global financial crisis of 2007 to 2009.
The reading was still a 42.5 forecast by economists and below the level of 50, which separates expansion from contraction. The data shows that confidence remains fragile even after budget-related uncertainty eased.
The euro pushed higher even after eurozone inflation came in line with forecasts, supporting the view that the European Central Bank will not be cutting interest rates again anytime soon.
Eurozone inflation fell to 2% year on year in December, down from 2.1% in November. This marks the first time that inflation has cooled back to the ECB’s 2% target since August.
The easy way kept the interest rate unchanged at 2% for the fourth consecutive meeting in December. The deja supports this move.
The ECB projected inflation will average 1.9% this year, down from 2.1% in 2025. Meanwhile, growth is expected to be more resilient than initially thought. The ECB is forecasting GDP growth of 1.2% this year, up from 1% Previously expected.
Meanwhile, core inflation, which excludes more volatile items such as food and fuel, fell to 2.3% in December from 2.4% in November. Service-sector inflation was 3.4%, down 0.1 percentage point from November.
