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EUR/GBP fell to around 0.8330 in early European trade. The British pound (GBP) gained in value on stronger UK consumer price index (CPI) data released on Wednesday.
UK CPI inflation climbed to 2.3% year-on-year in October, the highest in six months, up from 1.7% in September and beating forecasts of 2.2%. On a monthly basis, the consumer price index rose 0.6% after remaining unchanged in September. Meanwhile, annual core CPI, which strips out volatile food and energy prices, rose to 3.3% over the same period, beating market expectations of 3.1%. Additionally, the retail price index increased 3.4% year-on-year, compared with 2.7% in September.
Germany’s producer price index (PPI) fell 1.1% year-on-year in October, compared with a 1.4% drop in the previous month, in line with market expectations. This is the 16th consecutive period of producer deflation. On a monthly basis, producer prices rose 0.2%, rebounding from a 0.5% decrease in September and in line with market expectations.
The European Central Bank has cut interest rates three times since June as inflation approaches its 2% target, even as growth forecasts have been cut twice. The European Central Bank is widely expected to cut interest rates by 25 basis points next month, with a larger rate cut less likely.
On Wednesday, European Central Bank President Christine Lagarde will deliver the opening speech at the ECB’s Financial Stability and Macroprudential Policy Meeting in Frankfurt. Investors will also pay close attention to preliminary Eurozone and German Purchasing Managers Index (PMI) data due to be released on Friday.
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