Pound Euro Exchange Rate News: GBP/EUR Wavered as Eurozone Inflation Softened

November 30, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Wavered as Eurozone Inflation Softened

Euro (EUR) Quiet amid Softening Inflation

Meanwhile, the Euro (EUR) is zigzagging Wednesday morning as inflation in the Eurozone printed softer than expected. Against expectations of 10.4%, headline CPI came in at 10%, easing far more than anticipated.

Expectations of a slowdown in European Central Bank (ECB) interest rate hike expectations, which would usually sour investor spirits, are offset by hopes of inflationary pressures easing. A recovery in the economy trumps an aggressive rate hike policy. As inflation remains five times higher than the ECB’s target level of 2%, the central bank will still need to raise rates to tackle inflation. But following consecutive 75bps rate hikes, the ECB could begin to slow its pace, with a 50bps rate hike now expected at the next policy meeting.

However, core inflation, excluding volatile prices such as energy and food, remained high at 5%. Remaining steady at 5%, the latest figure halted a five-month streak of rising core inflation. But an easing in the energy crisis looks to buoy investors, and the latest inflation data could indicate it is finally peaking. Bert Colijn, Senior Eurozone Economist at ING, commented on the data:

‘While we’re far from out of the woods yet, it does look like the current economic environment could push the European Central Bank to a smaller 50bp hike next month.’

Pound (GBP) Undermined by Surging Food Inflation

The Pound (GBP) continued to trade erratically on Wednesday amid a myriad of economic headwinds that persist.

The latest data to highlight the economic turmoil that has gripped the UK, is the British Retail Consortium (BRC) reported on soaring food inflation. In the past year, food prices have rocketed by 12.4%, to a fresh record. Helen Dickinson, BRC CEO, warned of the tough winter ahead for many UK households:


‘Winter looks increasingly bleak as pressures on prices continue unabated. Food prices have continued to soar, especially for meat, eggs, and dairy, which have been hit by rocketing energy costs, and rising costs of animal feed and transport.’

Meanwhile, the Bank of England (BoE) Chief Economist has warned that Brexit is partly to blame for the UK’s soaring inflation. Leaving the European Union has caused a myriad of problems with job shortages, increased pricing pressures, and has subsequently weakened the economy. Pill said:

‘Ending free movement with the EU has made it more difficult for companies to hire people from overseas, requiring them to support visas. Pill said that while overall migration has not been affected, the nationality of migrant workers has shifted toward more people from outside the EU.’

GBP/EUR Exchange Rate Forecast: Eurozone Unemployment Rate

Looking ahead, the Pound Euro exchange rate could sour if the unemployment rate remains at the record low of 6.6%.

Meanwhile, the Pound will be left to trade on domestic issues and market sentiment amid a lack of major data. Thursday will see the release of the final reading of manufacturing PMI. An expected continued contraction could weigh further on Sterling.

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TAGS: Pound Euro Forecasts