EUR/GBP Falls Further Below 0.8500

EUR/GBP extended losses to trade around 0.8465 in early European trading Thursday. The euro moved lower after a weaker Eurozone HICP inflation report fueled expectations of a rate cut by the European Central Bank (ECB). Market participants will be keeping a close eye on Thursday’s UK general election.

The upcoming UK election is likely to limit the pound’s movement ahead of Thursday’s vote, while the outcome could spark some volatility in the pound on Friday. Political analysts and surveys predict that the Labour Party will win more seats than the record 418 it won in 1997 when former leader Tony Blair ended 18 years of Conservative control.

On the euro front, the far-right’s hopes of an outright victory in Tuesday’s French election were slim as centrist and left-wing candidates barely united to prevent Marine Le Pen’s National Rally from seizing power for the first time, Politico reported.

In addition, the eurozone’s annual inflation rate fell in June. According to the preliminary estimate released by Eurostat on Tuesday, the Eurozone Harmonized Index of Consumer Prices (HICP) rose by 2.5% year-on-year in June, compared with 2.6% in the previous month. This data boosted hopes of a possible rate cut by the European Central Bank, dragged down the EUR/GBP pair and was bearish for the EUR/GBP pair.

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