Euro hits fresh two-month lows against British Pound after hot Eurozone inflation data

The Euro (EUR) has dropped to its lowest level since May 2025 against the British Pound (GBP), falling below 0.8500, as Eurozone inflation data for September surged to a three-year high. Eurostat's preliminary Harmonised Index of Consumer Prices (HICP) data revealed the Eurozone's HICP accelerated to 3.8% year-on-year, driven by energy costs stemming from the Middle East conflict.

While the core HICP, excluding volatile food and energy prices, only increased to 2.5%, the divergence between German and French government bond yields widened to over 140 basis points, signaling mounting concerns about France's escalating borrowing costs. This scenario has kept investors away from the Euro, which has shown the weakest weekly performance among the G8 major currencies.

In the UK, while the Pound received some support from hawkish remarks by Bank of England officials, market analysts caution that further rate hikes are unlikely, potentially leading to a softening of the GBP. Meanwhile, crude oil prices remain relatively stable, hovering near $100, which could weigh on the Euro's recovery.