Pound Euro (GBP/EUR) Exchange Rate Nears Three-Month High as Russia Cuts Gas Flows to Europe

Pound Euro Exchange Rate Consolidates Recent Gains

The Pound Euro (GBP/EUR) exchange rate is consolidating its recent gains this morning. The pairing is currently trading just shy of a three-month high.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1904. Up roughly 0.2% from this morning’s opening rate.

Euro (EUR) Licks Wounds as Gazprom Reduces Gas Exports

The Euro (EUR) remains on the defensive today as Gazprom cuts gas flows to Europe again.

Russia’s state-controlled energy company is set to reduced exports through the Nord Stream pipeline to German by another 50% today. This will reduce gas flows to 33m cubic metres a day, roughly 20% of the pipeline’s full capacity.

Gazprom claims that the reduction is due to technical issues. A claim which EU leaders dispute.

In response to the latest cuts the EU agreed a plan to reduce gas usage by 15% this winter. While the current measures are voluntary the EU has warned they could become mandatory in the event of a complete shutdown of Russian gas exports.

The threat of a gas shortage triggered a sharp plunge in EUR exchange rates on Tuesday. Analysts fear a shortage could tip the Eurozone into a recession.

The Eurozone economy is already under significant pressure due to soaring inflation. The bloc’s latest manufacturing PMI reported Eurozone factory sector grow suffered its first contraction in two years this month.

Pound (GBP) Buoyed by BoE Rate Hike Bets

The Pound (GBP) is trading with modest gains this morning. Bank of England (BoE) rate hike speculation helping to underpin Sterling.

GBP investors are growing increasingly confident the BoE will accelerate its tightening cycle in August. A 50bps rate hike next week is now seemingly fully priced in.

Elsewhere the Pound’s upside potential appears capped by fresh concerns over the UK’s ‘summer of discontent’.

The UK is facing another day of widespread rail disruption as rail workers strike over pay.

GBP investors fear these strikes, combined with industrial action planned by several other sectors over the summer could further undermine the UK’s already fragile economy.

Pound Euro Exchange Rate Forecast: Eurozone GDP in Focus in the Second Half of the Week?

The publication of the Eurozone’s latest GDP figures may act as a key catalyst of movement in the Pound Euro (GBP/EUR) exchange rate in the latter half of this week.

Economists forecast the preliminary estimate will report quarter-on-quarter growth will have slowed from 0.6% to 0.2% in the three months to June. However in light of recent data there is a clear risk the Eurozone economy may have stalled.

This would further stoke fears of the Eurozone slipping into a recession this year and likely trigger another slump in the Euro.

UK political developments, meanwhile, could weigh on Sterling in the coming days amid the ongoing uncertainty of the Conservative leadership election.

Matthew Andrews

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