Pound Euro (GBP/EUR) Exchange Rate Trades Narrowly
The Pound Euro (GBP/EUR) exchange rate traded narrowly today after seeing a dip this morning. Fears of a Eurozone recession continued to mount over the course of the day which likely provided a boost to the currency pair.
On the other hand, the exchange rate likely saw gains limited as markets continued to speculate over UK Prime Minister Boris Johnson’s replacement. Confirmation today that Johnson would not seek to implement any drastic economic interventions may have also concerned investors.
At time of writing the GBP/EUR exchange rate is at around €1.1818, which is virtually unchanged from this morning’s figures.
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Pound Euro (GBP/EUR) Exchange Rate Ticks Lower amid Eurozone Recession Fears
The Pound Euro (GBP/EUR) exchange rate is trending lower today. The currency pair is likely coming under pressure from uncertainty surrounding the UK’s political leadership. On the other hand, fears of a Eurozone recession may be lending support to GBP/EUR.
At time of writing the GBP/EUR exchange rate is at around €1.1807, which is down around -0.2% from this morning’s opening figures.
Pound (GBP) Drops as Uncertainty Surrounding PM’s Replacement Grows
The Pound (GBP) is falling against its competitors today. The currency has shed yesterday’s gains that followed Prime Minister Boris Johnson’s resignation. Markets had largely priced in the event however, with focus now turning on to who will succeed Johnson and his remaining three months in office.
Johnson’s premiership collapsed on Thursday following the protest resignation of nearly 60 Conservative MPs. Economists remain concerned that a lack of action from Johnson as caretaker PM and the upcoming leadership contest could harm Sterling.
Mark Dowding of Bluebay Asset Management said:
‘Needless to say, at a time when the UK economy is already on its knees, these developments may continue to add to the negative sentiment and weigh on the outlook for UK financial assets.’
Recession fears amid further signs of an economic slowdown in the UK may also be pushing GBP lower today. Figures collected through the BDO High Street Sales Tracker indicated that retail sales have grown at their lowest rate since February 2021.
Sophie Michael, head of retail and wholesale at BDO, said:
‘With consumer confidence at historically low levels, real wages falling to a 20-year low and interest rates set to rise further, there are few signs of encouragement for retailers.’
Euro (EUR) Tumbles Despite Hawkish ECB Minutes
The Euro (EUR) is sliding against its rivals today. A risk-on impulse as well as a downturn to Eurozone bond yields are likely weighing on the single currency.
EUR could also be seeing losses due to ongoing fears of a recession in the Eurozone. There are concerns that Russia could partially limit or even cut off its supple of natural gas to the trading bloc. This, along with soaring energy costs across the board, could push the Eurozone into a recession.
Kay Neufeld and Jonas Keck, economists at the Centre for Economics and Business Research, said:
‘A tight gas supply will lead to further increases in energy prices for consumers, adding to inflationary pressures and claiming an even greater share of households’ disposable income, which is a recession risk in itself.’
Hawkish minutes from the European Central Bank (ECB) on Thursday could see major losses for the Euro limited, however. Analysts feel that the minutes signal the possibility of a larger than 0.25% rate hike at the central bank’s July meeting.
GBP/EUR Exchange Rate Forecast: Will GDP Recovery Help to Boost Sterling?
Looking to the coming week for the Pound, GDP figures on Wednesday could provide some support to the beleaguered currency. May’s figures are currently forecast to fall but show an improvement from April’s.
Also on Wednesday, any movement in the UK’s trade deficit could see GBP react accordingly.
Further developments surrounding the UK government’s leadership crisis could also weigh on Sterling in the coming week.
A speech from ECB President Christine Lagarde today could help the Euro to climb if she takes a hawkish stance.
Next week for EUR, a predicted fall to Eurozone economic sentiment could pull the single currency lower on Tuesday.
On Wednesday, a forecast cooling to German inflation could limit bets on EUR if investors pare back their rate hike bets.
Friday’s balance of trade figures for the Eurozone could also prompt action in the Euro.