EUR/GBP Forecast As The UK Core Inflation And Public Debt Rises
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- The EUR to GBP pair continued falling after the latest UK inflation data.
- The pair plunged to a low of 0.8531, the lowest point on August 2022.
- UK core inflation jumped to 7.1%, putting pressure on the Bank of England.
The EUR/GBP exchange rate continued falling on Wednesday after the strong UK inflation data. The pair dropped to a low of 0.8535, the lowest level since August 2022. It has crashed by more than 4.92% from the highest point this year.
UK consumer inflation data
The biggest GBP news on Wednesday was the latest UK consumer inflation data. According to the Office of National Statistics (ONS), the headline consumer inflation rose by 0.7% in May, higher than the median estimate of 0.5%.
The country’s inflation rose by 8.7% in May on a year-on-year basis. Economists were expecting inflation to jump by 8.4%. These numbers mean that the country’s cost of living crisis is continuing since inflation is higher than the Bank of England (BoE) target of 2.0%.
The core CPI, which excludes the volatile food and energy prices, rose from 6.8% in April to 7.1%. It rose by 0.8% on a month-on-month basis.
The UK inflation data came on the same day that the BoE started its two-day monetary policy meeting. It will then make its interest rate decision on Thursday. Economists polled by Reuters believe that the BoE will hike interest rates by 0.25% to 4.75%, the highest level in more than a decade.
The BoE is in a fix considering that the economy is going through stagflation, which is characterized by high inflation and slow economic growth. Data published last week showed that the economy expanded by just 0.2% in April and by 0.1% in three months to April.
The other important EUR/GBP news was the latest UK debt data. According to the ONS, the country’s net debt jumped to 2.6 trillion pounds in May, 100.1% of the total GDP. This was the first time the debt jumped above 100% since 1961.
EUR/GBP technical analysis
(Click on image to enlarge)
The EUR to GBP price continued falling this week. It moved below the important support level at 0.8726, the lowest points on January 20th and 17th March. Most recently, the pair flipped the support at 0.8550 (1st December low).
The EUR/GBP pair moved below the 25-day and 50-day moving averages and the 61.8% Fibonacci Retracement level. Therefore, the pair will likely continue falling as sellers target the next key support at 0.8500. A move below that level will open the possibility of it dropping to 0.8342 (August 2nd 2022).
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