- Pound (GBP) is rising for a second day
- UK CPI rose to 2.3% YoY from 1.7%
- Euro (EUR) is falling amid geopolitical worries
- Eurozone negotiated wage growth accelerates
The Pound Euro (GBP/EUR) exchange rate is rising for a second day. The pair rose 0.09% in the previous session, settling on Tuesday at €1.1966 and trading in a range between €1.1935 and €1.2002. At 12:00 UTC, GBP/EUR trades +0.36% at €1.2006.
The pound is rising for a second straight day after the latest data showed that inflation rose by more than expected in October.
Inflation, as measured by the consumer price index, rose to 2.3% year on year In October, up from 1.7% annually in September. This was ahead of forecasts of 2.2%.
Core inflation also increased to 3.3%, and service sector inflation, which the Bank of England monitors closely, increased to 5%.
The hotter-than-expected inflation data came after Bank of England governor Andrew Bailey had already warned about slower interest rate cuts given the uncertain outlook and inflationary pressures following the Labour budget.
Following the data, the market has lowered its rate cut expectations until the end of 2025 to just 60 basis points, equating to just over two 25 basis point rate cuts.
The euro is heading lower across the board amid growing concerns surrounding geopolitical tensions with Ukraine, the US, and Russia
These concerns are overshadowing data that showed wage growth accelerated in the third quarter of the year.
Eurozone negotiated wage growth rose to 5.4% in the July to October quarter. Up from 3.4% in Q2. ECB policymakers have highlighted strong wage growth as an obstacle to cutting interest rates more aggressively.
Even so, the central bank is still expected to cut rates by 25 basis points in the December meeting, although rate cuts in the coming year could be slightly slower should wage growth feed through to hotter inflation.