EUR/GBP drifts to 0.8670 lows after soft Eurozone inflation data

The Euro trims losses following rejection at two-week highs near 0.8700.
UK inflation remained steady in August, but the core CPI and services inflation eased.
In the Eurozone, consumer inflation cooled in August, but the Core CPI remained steady.

Guillermo Alcala FXStreet

The Euro has given away some of Tuesday’s gains on Wednesday. The pair pulled back from two-week highs a few pips shy of 0.8700, although it remains steady above the 0.8670 level so far.

In the UK, National Statistics data revealed that consumer inflation remained fairly steady above the bank’s 2% target rate in August. The CPI kept growing at a 0.4% monthly rate and 3.8%, unchanged from July, but still below the 3.9% and 0.5% readings anticipated by the market’s consensus.

The core CPI, on the other hand, eased to 3.6% from 3.8% in July, in line with market expectations and services inflation cooled to a 4.7% year-on-year growth from the previous month’s 5% pace. These figures have watered down the impact of the stronger headline figures.

The Euro, however, has failed to draw any significant support as Eurozone inflation figures have shown a similar trend. The headline HICP eased to a 2.0% year-on-year growth and a 01% monthly reading against expectations of steady inflationary pressures, at 2.1% and 0.2% respectively. Core inflation, in this case, has remained unchanged from the previous month growing at a 0.3% rate from July and 2.3% from August last year.

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Why it matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

USD/JPY stays below 160.50 as markets assess BoJ decision

USD/JPY fluctuates in a relatively narrow range above 160.00 on Tuesday as markets assess the Bank of Japan's (BoJ) decision to raise the policy rate by 25 at the June meeting. Meanwhile, investors keep a close eye on news coming out of the Middle East, while preparing for the critical Fed meeting.

AUD/USD trades in tight channel near 0.7050 despite hawkish RBA message

AUD/USD trades modestly lower on the day at around 0.7050 on Tuesday as markets adopt a cautious stance amid a lack of details surrounding the US-Iran peace agreement. The Reserve Bank of Australia (RBA) left the door open for possible policy tightening after leaving the interest rate unchanged, as expected, at the June meeting but failed to boost the Australian Dollar.

Gold clings to moderate gains above $4,300 following Monday's rally

Gold maintains a mildly positive tone, holding gains after rallying about 6% over the last few days. The precious metal's recovery, however, has lost steam after crossing the $4,300 line as the initial enthusiasm about the US-Iran peace deal faded, with investors moving to the sidelines in anticipation of details of the agreement and monetary policy decisions by the Fed.

Solana's rebound gains momentum as ETF inflows return

Solana (SOL) steadies at $73 after posting three consecutive green candlesticks since the weekend. The recent recovery is supported by institutional demand, with spot Exchange Traded Funds recording net inflows of $2.81 million on Monday.

BoJ just hiked and US-Iran deal is on the table: Why Japanese Yen is still around 160.00

The Bank of Japan lifted interest rates from 0.75% to 1.00%, its highest level in more than three decades. The landmark move aims to stabilize a sharply weakening Japanese Yen, but by looking at the immediate market reaction, it doesn’t look like it’s going to work.

4.2% headline, 0.2% core: Why the Fed's next hike may be targeting the wrong problem

May's CPI put headline inflation at 4.2% on the year, up from 3.8% in April and the hottest reading since April 2023, while core prices rose just 0.2% on the month, undershooting the 0.3% consensus and halving April's pace.