Market Outlook: Sterling May Rebound Against Euro if Service Inflation Accelerates in the UK

According to ING, the UK inflation data set to be released this week could help the pound recover some of its recent decline against the euro if service inflation accelerates. ING analyst Francesco Pesole noted that the markets might focus “almost solely” on the increase in service inflation, which could rise from 4.9% in September to 5.0% in October. Pesole mentioned that this situation could lead the markets to cautiously price in interest rate cuts by the Bank of England. ING continues to expect a moderate decline in EUR/GBP in the near term, as the European Central Bank may implement an "excessively large" interest rate cut in December. UK inflation data will be released on Wednesday.