- Pound (GBP) is rising for a third day
- UK inflation rose 2.6% YoY, up from 2.3% in October
- Euro (EUR) falls after a downward revision to Eurozone inflation
- The ECB are likely to keep cutting rates
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose 0.42% in the previous session, settling on Tuesday at €1.2112. It traded in a range between €1.2052 and €1.2124. At 19:00 UTC, GBP/EUR trades +0.12% at €1.2131.
The pound is pushing higher after UK data showed that inflation continued to rise in November for a second straight month.
You can flash, and as measured by the consumer price index, it rose 2.6% year over year in November, according to data from the Office of National Statistics. This was in line with economists’ forecasts. However, it was up from 2.3% in October.
Core inflation, which excludes more volatile items such as energy and food, was 3.5%, just below expectations of 3.6% but still up from 3.3% in October.
Headline inflation fell to a 3.5-year low of 1.7% in September but ticked higher over the previous month owing to an increase in the regulator-set energy price cap this winter and a tight domestic labor market.
Persistent inflation in the service sector, the dominant part of the UK economy, has resulted in the market pricing in almost no chance of a rate cut in Thursday’s final Bank of England rate decision for 2025.
Well, the UK is dealing with sticky inflation. It’s also experiencing lackluster growth, with the GDP unexpectedly contracting by 0.1% in October, the second straight monthly downturn.
The euro has fallen further after data showed that eurozone annual inflation increased by slightly less than expected in November.
Annual CPI across the eurozone region rose by 2.2% year on year, down from the initial reading of 2.3%. However, this was still up from the 2% recorded in October and 1.7% in September.
When the figures are broken down by country, inflation in Germany remained above average at 2.4%, while inflation in France and Italy was below 2%.
The weaker-than-expected inflation print raised expectations that the European Central Bank will continue cutting interest rates as we approach 2025.
