Euro retreats further as solid UK data supports British Pound

EUR/GBP extends losses to the 0.8440 area after pulling back from highs near 0.8480 on Thursday.
Upbeat UK data has boosted the Pound this week, while Eurozone macroeconomic figures disappointed.
BoE's Bailey shows concern about inflation but shows no pressure to hike intrerest rates.

The Euro (EUR) remains on its back foot against the British Pound (GBP) on Friday, as UK macroeconomic data released on Tuesday beat expectations while Eurozone’s figures disappointed. The EUR/GBP pair hit session lows around 0.8440 on Friday, down from Thursday’s highs near 0.8480, and is on track to complete a three-week bearish cycle.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Data released on Thursday showed the UK economy grew 0.1% in August, against market expectations of a 0.1% contraction, as a strong industrial sector offset soft readings in services and construction.

In the Eurozone, Industrial Production figures from August showed a 0.5% contraction, against market expectations of a flat performance. Beyond that, data from July was revised down to a 0.3% decline, from the 0.2% drop previously estimated.

Bailey shows concerns about inflation but discards aggressive tightening

The Bank of England's governor spoke at the International Monetary Fund meeting in Bangkok earlier on Friday, and his speech was scored at 6.2/10 by FXS Speechtracker, slightly below Governor Bailey’s historic 6.4/10 baseline. Bailey’s showed ongoing concern about inflation persistence and growth still falling short of policy objectives.

Bailey affirmed thst it is “too early to form strong views on the strength of 2nd round effects” and that signs of those effects are “subdued”, suggesting limited immediate pressure for aggressive tightening. The impact of these comments on the Pound were marginal.

In the calendar on Friday, the final Eurozone Harmonized Index of Consumer Prices (HICP) is expected to confirm preliminary estimates, which showed that consumer prices accelerated to a 3.8% year-on-year (Y-o-Y) rate in September, from 3.2% in August, with core inflation showing a more moderate uptrend, to 2.5% y-o-y, from 2.4% in the previous month.

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.

Economic Indicator

Core Harmonized Index of Consumer Prices (YoY)

The Core 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. Core HICP excludes volatile components like food, energy, alcohol, and tobacco. The Core HICP is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.