ExchangeRates.org.uk - The Pound (GBP) was initially subdued on Thursday as Wednesday’s weaker inflation data continued to weigh on GBP. The September consumer price index showed that British inflation cooled far more than forecast, dropping from 2.2% to 1.7% rather than 1.9%, and dipping below the Bank of England’s (BoE) 2% target.
This sparked bets on back-to-back interest rate cuts from the BoE in November and December, thereby hammering the Pound. Sterling remained subdued on Thursday, as a lack of data left GBP investors to mull over the softer CPI print and possible BoE cuts. However, GBP/EUR was able to creep higher as the single currency faced its own challenges.
The Euro (EUR) was also initially muted on Thursday as investors awaited the ECB interest rate decision. As the session progressed, expectations of an ECB rate cut began to weigh on the common currency. As expected, the bank cut interest rates for the third time this year. However, while the bank said that the disinflationary process is ‘well on track’, it also indicated that it expects inflation to rise again in the coming months. This mixed commentary spared EUR from steeper losses.
Looking ahead, the Pound Euro exchange rate could face losses on Friday amid the UK’s latest retail sales report. At the time of writing, economists expect to see a 0.3% contraction in UK sales growth in September. This could dent GBP, with a decline in consumer spending fuelling recent concerns that the British economy is slowing down. This could, in turn, also fuel bets on more BoE interest rate cuts, potentially adding to pressure on the Pound.
This content was originally published on ExchangeRates.org.uk