- EUR/GBP stalled as falling eurozone inflation data increased the likelihood that the ECB would cut interest rates this month.
- The market reflects a 95% probability that the European Central Bank will cut interest rates by 25 basis points in October.
- According to the BoE's DMP survey, British businesses' inflation expectations for the year ahead fell by a further 0.1% in the third quarter.
EUR/GBP regained recent gains and traded around 0.8390 in Asian trading on Friday. This downward pressure is thought to be due to the decline in the euro zone's inflation rate, which has increased expectations for the European Central Bank (ECB) to cut interest rates in October, the third time this year.
Earlier this week, the Harmonized Consumer Price Index fell to 1.8% year-on-year in September, below the ECB's 2% target and the lowest level since April 2021. The market reflects a 95% probability of a 25 basis point rate cut this month.
However, the euro/pound cross rose following dovish comments from Bank of England (BoE) Governor Andrew Bailey on Thursday. Bank of England Governor William Bailey said he expected the central bank to be “a bit more aggressive” in cutting interest rates as inflation conditions remained favorable. The Bank of England is widely expected to cut interest rates by 25 basis points at its November meeting.
The latest Bank of England Decision Makers Panel (DMP) research, published on Thursday, showed that “UK businesses' one-year-ahead CPI inflation expectations fell a further 0.1% to 2.6% in the quarter to September.” It was done. The three-month moving average for September showed that expected year-on-year wage growth remained stable at 4.1%, with economic uncertainty also decreasing over the same period.
