November 01, 2023 1:4 PM

EUR/GBP retreats from its five-month high, currently trading below the 0.8700 level

EUR/GBP retreats from its five-month high, currently trading below the 0.8700 level

After retreating from the five-month high, EUR/GBP is still losing ground. On Wednesday morning during the early European session, it was trading lower at 0.8690. With the announcement on Tuesday of the weaker-than-expected consumer inflation statistics by Eurostat, the EUR/GBP cross is under pressure to decline.

According to the Eurozone report, October's preliminary Harmonized Index of Consumer Prices (YoY) dropped from 4.3% to 2.9%, below the 3.1% market estimate. In Q3, the seasonally adjusted Gross Domestic Product (YoY) was 0.1% as opposed to the anticipated 0.2%.

The notable deceleration in consumer prices is consistent with the market's expectation that the European Central Bank (ECB) will not pursue further increases in interest rates. Furthermore, the Euro (EUR) may continue to be undermined by the impending dangers of a recession, which would affect the EUR/GBP cross.

Officials from the European Central Bank (ECB) do not rule out additional tightening, though. Joachim Nagel, a member of the ECB Governing Council, stated, "We must not let up too soon, but our monetary policy is working." He stated that rates ought to stay high enough for a considerable amount of time.

However, due to investor fears over a possible slowdown in the UK economy, the Pound Sterling (GBP) may encounter difficulties in the near future if it is assumed that the Bank of England (BoE) would keep interest rates at 5.25% during its meeting on Thursday.

Guidance on inflation expectations and future interest rates is much sought after by investors. Prime Minister of the United Kingdom (UK), Rishi Sunak, made a difficult commitment in January to cut inflation to 5.4% by year's end, given that the annual price rise was 6.7% in September.