GBP/EUR Exchange Rate Softens as Transport Strikes Begin
The Pound Euro (GBP/EUR) exchange rate has weakened so far this morning as travel in London is ‘severely disrupted’ by rail strikes. Meanwhile, UK retail sales rose unexpectedly in July and German producer price inflation hit 37.2% on an annualised basis.
At the time of writing, GBP/EUR is trading at €1.1788, down 0.3% from today’s opening levels.
Pound (GBP) Trends Lower as Rail Strikes Weigh on Economic Activity
The Pound (GBP) is sinking against its peers today as ramped-up industrial action threatens economic growth, with many commuters struggling to get to work.
Both unions and the government are taking a hard-line approach with transport secretary Grant Shapps now warning that railway reforms will be imposed if workers do not agree to new deals.
‘If we can’t get this settled in the way that we are proposing,’ said Shapps, ‘we will have to move to what is called a section 188; it is a process of actually requiring these changes to go into place so it becomes mandated.’
Meanwhile, RMT boss Mark Lynch has launched the ‘Enough is Enough’ campaign along with other trade union representatives and community organisations, calling on others to get involved with the strikes:
‘It’s no good just being pissed off. You’ve got to say, I’m going to turn that into and organisation with a set of demands and a way to fight for them.’
Elsewhere, UK retail sales rose in July by 0.3% rather than falling as predicted. Analysts attribute the climb to sales of non-store retailing (predominantly online) as a series of promotions boosted purchases.
The news is insufficient to counter GBP headwinds, however, as the consumer economy continues to slow overall. Sales volumes are down 3.3% over the past year, despite having increased on their pre-Covid 2020 levels.
Euro (EUR) Trades Broadly Higher as German Data Exceeds Forecast
The Euro (EUR) is firming against the majority of its peers this morning in spite of various headwinds – including a slight risk-off mood and fears of a recession in Germany.
Elsewhere, European Commission President Ursula von der Leyen is considering the implications of the war in Ukraine for the imminent G20 gathering.
Today’s producer price reading from Germany rose to a new record high of 37.2% in July 2022, from 32.7% a month earlier. Energy prices were largely to blame for the uptick.
While rising inflation puts pressure upon the European Central Bank (ECB) to tighten monetary policy, extreme price pressures also threaten to trigger an economic recession if interest rates rise while growth is still subdued.
In political news, Ursula von der Leyen has said:
‘We have to consider very carefully whether we paralyze the entire G20; I don’t advocate that. In my opinion, G20 is too important, also for the developing countries, the emerging countries, that we should let this body be broken by Putin.’
Uncertainty over the international summit could inspire some volatility in currency markets, as relations between Russia, China, the US and Europe remain strained.
Striking a more positive note is a new report from The Institute for the Study of War, a non-profit research organisation. The institute found there were ‘no claimed or assessed Russian territorial gains in Ukraine on August 18, 2022 for the first time since July 6, 2022.’
GBP/EUR Exchange Rate Forecast: External Factors, Central bank Dynamics to Influence Trading?
Looking ahead, the Pound Euro exchange rate is likely to trade on external factors through the remainder of the session. If UK strikes continue to weigh upon Sterling, with rhetoric becoming more heated, GBP could slide.
Elsewhere, a speech from the US Federal Reserve’s Tom Barkin may affect EUR trading this afternoon. If Barkin strikes a hawkish tone, the US Dollar (USD) may climb. This may push the Euro lower due to the strong negative correlation between the two currencies.