The EURO to British Pound (EUR/GBP) exchange rate has shown resilience, hovering around 0.8380 during the early Asian session on Friday, reflecting a modest increase of 0.11% for the day. The recent economic data has provided a boost, with German inflation remaining steady and UK GDP growing as anticipated.
In Germany, the Harmonized Index of Consumer Prices (HICP) reported a year-on-year increase of 1.8% in September, aligning with both previous readings and market expectations. This stability in inflation supports a positive outlook for the EURO as traders absorb insights from the European Central Bank’s recent commentary on economic growth challenges.
The recently released meeting minutes from the European Central Bank confirm that officials still believe inflation is on track to meet the 2% target. They have characterized the decision to lower interest rates by 25 basis points last month as a necessary response to softening inflation and a sluggish economic recovery. The ECB’s strategy moving forward is likely to be cautious and contingent on forthcoming economic data. There is widespread expectation that the deposit rate will be reduced to 3.5% in the coming week, with a significant majority of economists predicting additional cuts in December.
In the UK, the economy experienced a modest growth of 0.2% in August, consistent with forecasts. Experts believe that reluctance from the Bank of England to implement aggressive rate cuts will help support the Pound Sterling in the short term. Recent remarks from the central bank’s chief economist highlighted the risks associated with rapid rate reductions. Investors are now anticipating a cumulative rate cut of 0.5%, bringing the base rate to 4.5% by the end of the year through a series of measured adjustments in upcoming meetings.
