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Pound euro exchange rate steady as weak UK inflation fans Bank of England rate cut fears


The data left investors cautious, with weakening inflation heightening fears of a rate cut from the Bank of England (BoE) after two BoE policymakers voted to cut rates just last week. Howard Archer, an Economist at EY Item Club, commented: “Inflation dipping more than expected to 1.5 [percent] in October will… likely fan expectations that the Bank of England will cut interest rates before too long if the economy fails to pick up from its current struggles.”

Today also saw the UK Retail Price Index for October fall below consensus at -0.2 percent due to ongoing Brexit uncertainty. 

However, the pound to euro exchange rate was largely unmoved as UK political developments ahead of the 12th December general election remain firmly in focus. 

The euro failed to benefit from today’s release of the Eurozone’s industrial production figure for September, which beat forecasts and rose by 0.1 percent but failed to improve market optimism in the bloc’s flagging economy. 

Bert Colijn, Senior Economist for the Eurozone at ING, was downbeat in his assessment, saying: “It could […] be quite some time before businesses start to see new orders improve and regain confidence, even in the more positive scenarios imaginable for global trade.” 

“Until then, it is unlikely that a trough in the Eurozone industrial recession has been reached.”

Meanwhile, the German economy remains a major concern for euro traders, with fears that the Eurozone’s powerhouse could face a technical recession on Thursday, when the quarter-on-quarter German GDP figures are due to be released. 

We could see the pound to euro exchange rate edge higher tomorrow if the Eurozone’s largest economy descends into a recession. 



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