EUR/GBP drops sharply to 0.8460 as EU Inflation Slows

The pound jumped more than 1 percent against the euro, the biggest gain in six months, after euro-area inflation slowed and the jobless rate climbed to a record, boosting demand for alternatives to Europe’s shared currency.

Sterling advanced for a second day versus the euro as the reports spurred speculation the European Central Bank will cut interest rates as soon as its meeting next week to revive growth. The pound may extend gains, according to UBS AG. U.K. government bonds fell as an index of U.S. business activity expanded at the fastest pace since March 2011, damping investor appetite for safer assets.

“There’s a very sharp decrease in the euro-region inflation rate and the market is pricing in the ECB might take some more action,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “That’s reflected in a weaker euro.”

Bloomberg

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