Pound Euro Exchange Rate Flat amid European Energy Concerns
The Pound Euro (GBP/EUR) exchange rate is trading with modest gains this morning. The uptick in the pairing comes as Russia halts gas flows to Germany through the Nord Stream 1 Pipeline.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1640. Virtually unchanged from this morning’s opening rate.
Euro (EUR) Subdued as Russia Begins ‘Unscheduled Maintenance’ on Nord Stream 1 Pipeline
The Euro (EUR) opens today’s session on the defensive. The closure of the Nord Stream 1 pipeline for ‘unscheduled maintenance’ has raised fresh concerns over Europe’s energy crisis.
The pipeline to Germany is a key throughfare for Russian gas into Europe. EUR investors fear the latest shutdown could hinder Europe’s efforts to fill its gas storage ahead of winter.
There are also concerns that Russia may use problems found during the ‘unscheduled maintenance’ as a pretext to further reduce gas flows via the pipeline when it reopens. As it did following annual maintenance earlier in the year.
Meanwhile, the release of the Eurozone’s latest inflation figures may be tempering the Euro’s losses this morning.
August’s flash figures reported inflation climbed to a new record high of 9.1%. This was up from 8.9% in July and was higher than the 9% forecast by economists.
The latest jump in inflation is likely to bolster expectations the European Central Bank (ECB) will deliver a 75 basis point interest rate hike next week.
Pound (GBP) Muted amid Political Jitters
Trade in the Pound (GBP) is mixed this morning amid a renewed focus on the Conservative leadership election.
Polls overwhelmingly predict that Liz Truss will take over as Prime Minister from Monday. But GBP investors are uncertain about her economic policies.
Analysts have expressed doubt that Truss’ planned tax cuts will help tackle inflation. How she will fund these tax cuts is also a cause for concern.
Economists at Mizuho Bank, suggest:
‘Recent polls suggest Foreign Minister Liz Truss is in the driving seat. However, there are lots of question marks about her ability to run the economy. She has called for tax cuts (and an end to tax rises) without saying how they would be paid for.
Truss’ rival and former Chancellor Rishi Sunak has also suggested her proposals could also pose risks to public finances.
Pound Euro Exchange Rate Forecast: UK Manufacturing PMI to Confirm Sharp Contraction?
The release of the UK’s latest manufacturing PMI could drag on the Pound Euro (GBP/EUR) exchange rate in the latter half of this week.
August’s finalised figures are expected to confirm growth in the factory sector slumped sharply. The preliminary release reported the index plummeted from 52.1 to a two-year low of 46.
Meanwhile, the Eurozone’s manufacturing PMI is expected to confirm another contraction in the bloc’s private sector. This may also drag on EUR exchange rates, although a more modest slump than in the UK could help the Euro rise against the Pound.