© Reuters.
LONDON – Sterling saw a fluctuation in value as the UK’s inflation rate unexpectedly rose to 4%, boosting the exchange rate to €1.1670 before it slightly retreated to €1.1651. The uptick in inflation has led to market anticipation of fewer Bank of England (BoE) interest rate cuts by the end of the year.
The currency, however, faced downward pressure following a significant 3.2% fall in UK retail sales, which dampened the initial gains from the inflation data. Meanwhile, economic indicators from the Eurozone painted a picture of a downturn, with Germany’s GDP contracting by 0.3% and industrial production also declining by 0.3% in November. These figures have contributed to a negative outlook for the EUR.
Adding to the Eurozone’s economic woes, the European Central Bank’s (ECB) meeting minutes highlighted concerns over subdued foreign demand. In Germany, Producer Price Index (PPI) figures fell more than anticipated, registering a -1.2% drop, further weighing on the euro.
Despite these developments, the GBP/EUR exchange rate has stabilized at 1.1650. Investors and analysts are now looking ahead to upcoming PMI forecasts for both the UK and the Eurozone, which are expected to provide further insight into the economic trajectory of each region and could have implications for their respective currencies.
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