- EUR/GBP extends losses after downbeat Eurozone economic figures.
- Eurozone HICP (YoY) reduced to 2.9% and GDP (YoY) eased to 0.1%.
- Pound Sterling could face challenges as BoE is expected to keep interest rates at 5.25%.
EUR/GBP continues the losing streak post retreating from the five-month high, trading lower around 0.8690 during the early European session on Wednesday. The EUR/GBP cross faces downward pressure as the Eurostat released the weaker-than-expected consumer inflation data on Tuesday.
The Eurozone report showed that the preliminary Harmonized Index of Consumer Prices (YoY) for October, reduced to 2.9% from 4.3% prior, below the market anticipations of 3.1%. The seasonally adjusted Gross Domestic Products (YoY) came in at 0.1% in Q3 compared to the 0.2% expected.
The significant slowdown in consumer prices aligns with the market’s anticipation that the European Central Bank (ECB) is unlikely to push for additional interest rate hikes. Moreover, the looming risks of a recession may continue to undermine the Euro (EUR), influencing the EUR/GBP cross.
However, European Central Bank (ECB) officials maintain the possibility of further tightening. Member of the ECB Governing Council Joachim Nagel said, “Our tight monetary policy is working, but we must not let up too soon.” According to him, rates should remain at a sufficiently high level for an extended period.
On the other side, the Pound Sterling (GBP) could face challenges in the near term as investors lean towards the belief that the Bank of England (BoE) will maintain interest rates at 5.25% in Thursday’s meeting, driven by concerns about a potential slowdown in the UK economy.
Investors are keen on receiving guidance regarding future interest rates and the inflation outlook. United Kingdom (UK) Prime Minister Rishi Sunak pledged in January to halve inflation to 5.4% by year-end, a commitment that appears challenging as annual price growth stood at 6.7% in September.