Pound-to-Euro Rate Slips Amid Rising Eurozone Inflation

The Pound-to-Euro exchange rate declined on Thursday due to rising inflation in the Eurozone and a downgrade to UK service sector growth. The GBP/EUR exchange rate was trading at around €1.1628, down from the start of the session.

The sharp acceleration in factory gate prices, particularly when coupled with Tuesday's strong consumer price index, painted a picture of building inflationary pressures within the Eurozone. This underpins expectations that the European Central Bank (ECB) may continue to tighten monetary policy beyond the interest rate hike it is widely expected to deliver next week.

The Pound was muted on Thursday after the latest UK services PMI was revised lower. The final S&P Global UK Services PMI came in at 52.5 for August, down from the preliminary estimate of 52.8, although this still marked an improvement from July's 52.1 and represented the fastest pace of services-sector growth since April.

Looking ahead, the next catalyst for movement for the Pound Euro exchange rate is likely to be a scheduled speech by Bank of England (BoE) Governor Andrew Bailey. Sterling could come under pressure on Friday morning if any guidance from Bailey remains cautious.