The EUR/GBP pair experienced a decline during the North American session on Wednesday, following the recent inflation data, which aligned with expectations yet remained marginally above the European Central Bank’s target. The cross is currently trading at 0.8696, reflecting a decrease of 0.36%.
In September, Eurozone inflation increased by 2.2% year-over-year, while core HICP remained stable at 2.3%, both figures consistent with economists’ expectations. The Eurozone manufacturing PMI has decreased to 49.8, indicating a return to contraction territory, whereas the UK factory PMI remains steady at 46.2. In Q2, UK GDP showed no growth, as households faced inflationary pressures and potential tax increases that could negatively impact the outlook for Sterling.
> Cross declines even as Eurozone CPI remains above the ECB’s target and business activity indicates signs of recovery : The Eurozone indicated that inflation increased by 2.2% year-over-year in September, consistent with projections yet surpassing August’s figure of 2%. Excluding volatile items, the core Harmonized Index of Consumer Prices for the bloc remained stable at 2.3% YoY, as anticipated. Additional data indicated a deterioration in business activity within the Eurozone, as evidenced by the HCOB Manufacturing PMI dropping from 50.7 to 49.8 in September, thus entering contraction territory. In the UK, the S&P Global Manufacturing PMI experienced a contraction in September; however, it seems to have stabilized, remaining unchanged at 46.2, consistent with August’s figure.
On Tuesday, market participants analyzed the newly released Gross Domestic Product figures for the UK, indicating that the economy experienced stagnation in Q2. Currently, British households are contending with elevated inflation levels, and a potential tax hike proposed by Finance Minister Rachel Reeves could exert additional pressure on the British Pound.