Data from the UK and European economies will drive tomorrow’s EURGBP exchange rate.
EURGBP – Weekly Chart
EURGBP has been rallying since mid-July and found resistance in recent days. This will be the key obstacle to further gains.
This week’s high-level UK economic data will test the case for the Bank of England’s policy makers not to cut interest rates next month. That will be due to expected higher inflation for the first time this year.
The Office for National Statistics (ONS) will release its latest reading on Wednesday. City economists say consumer prices will accelerate to 2.3% in July. That would be the first uptick in inflation since last December and slightly ahead of the central bank’s 2% target in May.
Despite a slowdown in services prices, analysts expect pressure from a sharp fall in energy prices last July, which came out of the annual figure.
The Bank of England cut rates in August, but higher prices may force a pause in September. Markets expect two more 25-basis-point cuts by the end of this year.
Ahead of that data, there is also UK employment at 2 pm HKT, followed by German and Eurozone economic sentiment data at 5 pm. The British economy created 19k jobs last month and will look to build on that.
A drop in European sentiment is expected from 41.8 to 38 as the mood sours a little among economists.
According to economists, the European Central Bank is expected to cut its benchmark rate once each quarter through the end of next year. The economy also saw inflation rise to 2.6%, but economists expect further rate cuts this year.
