EUR/GBP breaks below 0.8350 following stronger UK inflation data

• EUR/GBP falls after the release of higher-than-expected UK Consumer Price Index data.
• The UK CPI inflation climbed to 2.3% YoY in October, the highest in six months, up from 1.7% in September.
• German Producer Price Index fell by 1.1% YoY in October, marking the 16th consecutive period of producer deflation.

EUR/GBP loses ground to near 0.8330 during the early European hours. The Pound Sterling (GBP) appreciates following the stronger Consumer Price Index (CPI) data from the United Kingdom (UK) released on Wednesday.

The UK CPI inflation climbed to 2.3% year-over-year in October, the highest in six months, up from 1.7% in September and surpassing forecasts of 2.2%. On a monthly basis, the CPI increased by 0.6% after remaining unchanged in September. Meanwhile, the annual Core CPI, which excludes volatile food and energy prices, rose to 3.3% during the same period, exceeding market expectations of 3.1%. Additionally, the Retail Price Index increased by 3.4% year-over-year, compared to 2.7% in September.

In Germany, the Producer Price Index (PPI) fell by 1.1% year-on-year in October, following a 1.4% decline the previous month, in line with market expectations. This marks the 16th consecutive period of producer deflation. On a monthly basis, producer prices rose by 0.2%, rebounding from a 0.5% drop in September, also matching market estimates.

Since June, the ECB has reduced rates three times as inflation approaches its 2% target, although growth forecasts have been downgraded twice. Markets largely anticipate a 25-basis-point rate cut next month, with a smaller chance of a more significant reduction.

On Wednesday, ECB President Christine Lagarde is set to deliver the opening remarks at the ECB’s Conference on Financial Stability and Macroprudential Policy in Frankfurt. Investors will also be closely watching the preliminary Purchasing Managers’ Index (PMI) figures from the Eurozone and Germany, which are scheduled for release on Friday.