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EUR/GBP Anticipates Further Losses Below 0.8660 As The BoE Anticipates Additional Rate Increases And UK Inflation Is Anticipated
As the Bank of England's interest rate apogee is far from over, EUR/GBP is anticipated to plunge below 0.8660. BoE Pill remained confident that longer-term inflation expectations in the United Kingdom have not deviated from the target. In the second half of the year, it is expected that the real GDP of the Eurozone will experience a modest decline.
During the Asian session, the EUR/GBP pair appears vulnerable above the immediate support at 0.8660. As Andrew Bailey, Governor of the Bank of England (BoE), has made clear, current interest rates have not yet reached their apex, it is anticipated that the cross will incur additional losses. BoE In front of the Treasury Select Committee (TSC) of the British Parliament, Bailey reiterated that they must use the tool of interest rate increases cautiously.
At the meeting with the Treasury Select Committee, BoE Bailey appears confident that the UK's inflation will decline drastically in the near future. The price of gasoline has already decreased by 10%, and food inflation is also losing steam. Regarding UK Employment, BoE Bailey stated, "Private sector wages are not increasing faster than anticipated."
In contrast, in his testimony, BoE Chief Economist Huw Pill acknowledged that the central misunderstood the intensity and persistence of UK inflation. BoE Pill stated, "We are attempting to comprehend why we have erred in our inflation forecasts." However, BoE policymakers remained confident that inflation expectations for the longer term have not deviated from the target.
Moving forward, the United Kingdom's April inflation data will remain a focal point. According to the preliminary estimate, headline inflation is anticipated to decline sharply to 8.2% from 10.1% previously. The core Consumer Price Index (CPI) excluding the effects of oil and food prices is anticipated to remain unchanged at 6.2%.
In the meantime, the Euro remained active on Tuesday following conflicting preliminary PMI data for May. The manufacturing PMI decreased to 44.6 from 46.2 and 45.8 in the previous release. While Services PMI increased to 55.9 from 55.6, it remained below the previous reading of 56.2. Commerzbank analysts anticipate a modest decline in real GDP in the second half of the year.
Luis de Guindos, vice president of the European Central Bank (ECB), stated on Tuesday in the Eurozone, "The non-bank financial sector has remained largely stable in recent months, despite the stress that emerged in the banking sector in March."
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