GBP/EUR Exchange Rate Remains Flat amid Energy Uncertainty
(Updated: 16:50, 10/8/22) The Pound Euro exchange rate remains rangebound this afternoon amid ongoing concerns over the energy outlook for both the UK and Eurozone.
In the UK there are concerns the country could potentially face winter blackouts as part of the government’s energy crisis plans, amid concerns the country could face a shortage if the weather becomes too cold.
Meanwhile EUR investors remain concerned that Europe could face a gas shortage this winter as tensions between the EU and Russia continue to flare.
Original article continues below:
Pound Euro Exchange Rate Muted on Energy Concerns
The Pound Euro (GBP/EUR) exchange rate is trapped in a narrow range this morning. The pairing muted amid growing concerns over the unfolding energy crisis in the UK and Europe.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1831. Virtually unchanged from this morning’s opening rate.
Pound (GBP) Muted amid Energy Bill Concerns
The Pound (GBP) is struggling to find momentum this morning. As concerns over a potential massive increase in household energy bills weigh on Sterling sentiment.
On Tuesday, consultancy Cornwall Insight warned that average UK energy bills could more than double to £4,200 a year.
GBP investors fear this could result in a collapse in consumer spending in the coming months. Analysts suggest millions of households are at threat of falling into fuel poverty.
Justina Miltienyte, head of policy at uSwitch, said:
‘Energy debt has hit an all-time high with the worst possible timing, turning this winter’s energy price hike into a deeply precarious situation for many households.’
Concerns over the energy crunch has been exacerbated by the UK’s currency political vacuum. Outgoing Prime Minister Boris Johnson has refused to pursue any major spending policies before he leaves office on 5 September.
Speaking yesterday Johnson said he is ‘absolutely certain’ his successor will provide more help to households.
However Liz Truss – the current frontrunner to replace Johnson as PM – has repeatedly stated she is reluctant to provide any additional ‘handouts’ to households. Leaving GBP investors increasingly concerned about the UK’s economic outlook.
Euro (EUR) Subdued on Gas Shortage Fears
The Euro (EUR) is flat this morning amid ongoing fears over Europe’s own energy crisis.
The threat of a gas shortage later this year is a major concern for EUR investors, who fear it could tip the Eurozone into a recession.
The impending US CPI release is also limiting movement in the Euro this morning.
July’s US inflation figures will be key in determining how aggressively the Federal Reserve may continue to raise interest rates next month.
If inflation slows bets for a 75bps rate hike in September may fade. This could weaken the US Dollar (USD) and bolster the Euro thanks to the strong negative correlation between the pairing.
Pound Euro Exchange Rate Forecast: Slump in UK GDP to Sink Sterling?
The publication of the UK’s latest GDP figures may act a major headwind for the Pound Euro (GBP/EUR) exchange rate in the second half of this week.
The preliminary figures are expected to report the UK economy contracted by 0.2% in the second quarter.
This will undoubtedly feed into GBP investors’ concerns over the UK’s economic trajectory. Fresh recession fears likely reviving Pound selling pressure.
Ongoing concerns over European energy security may drag on the Euro in the coming days.
On the data front, the focus for EUR investors is likely to be on the release of the Eurozone’s latest industrial production figures on Friday. Will a slowdown in production growth in June dent the Euro?