Pound Rises as EUR/GBP Slips Below 0.8650 After Hot UK CPI
The EUR/GBP pair dropped in early European trading on Wednesday, sliding toward 0.8620. The British pound gained strength after UK inflation data came in higher than expected.
The Consumer Price Index (CPI) showed a 3.8% rise in July, compared to 3.6% in June. This was above market forecasts. Core CPI, which excludes food and energy, also reached 3.8% year-on-year, slightly stronger than estimates of 3.7%. On a monthly basis, inflation slowed to 0.1% in July from 0.3% in June, matching expectations.
This hotter CPI reading boosted demand for the pound in the Forex market. Traders now look ahead to a speech from ECB President Christine Lagarde, which may give signals about the European Central Bank’s monetary policy. For now, analysts believe the ECB is likely to keep interest rates unchanged in its September meeting.
Meanwhile, market focus is also on the upcoming preliminary August PMI data. A strong PMI could give the euro some support and impact EUR/GBP price action.
Impact:
The pound could remain strong if inflation stays elevated. The euro might recover if Lagarde sounds cautious or PMI data possibly boosts confidence in the Eurozone economy.