Pound Falls amid Poor UK Outlook, Euro Tumbles as Nord Stream 1 Closure Intensifies Recession Fears

  • Pound falls as poor UK outlook continues to weigh on currency

  • Liz Truss confirmed as UK PM with substantial support package rumoured

  • US Dollar bolstered by Fed rate hike bets

  • Euro slumps as Gazprom closes Nord Stream pipeline indefinitely

GBP/EUR Exchange Rate: Poor PMI Figures Indicate Struggling Private Sector

The Pound Euro (GBP/EUR) exchange rate slipped over the past seven days. Poor data releases for the UK saw losses for the Pound. Thursday saw the final reading of August’s manufacturing PMI indicate a downturn in the country’s manufacturing sector.

A drastic slowdown to service sector performance on Monday also weighed on Sterling sentiment. August’s PMI printed the softest expansion in 18 months at 50.9. A drop in retail sales growth may have also caused a dip in GBP on Tuesday. Growing Bank of England (BoE) interest rate hike bets may have limited major losses, however.

Next week. Employment figures on Tuesday are likely to cause movement in the Pound. A forecast drop to average earnings could dent confidence in GBP. Inflation figures on Wednesday could push GBP higher if figures rise for a fourth consecutive month.

GBP/USD Exchange Rate: Liz Truss Confirmed as UK’s New Prime Minister

The Pound US Dollar (GBP/USD) exchange rate fell over the past week as the UK’s poor economic outlook continued to weigh on the pair. Sterling came under renewed pressure after dire warnings from economists that inflation could hit 20%.

The confirmation of Liz Truss as the next UK Prime Minister helped the currency to temper its losses, however. Reports that Truss is set to announce a substantial financial aid package for households and businesses may have also lent support to GBP.

Further details on support measures from the UK government could go some way towards limiting further losses for Sterling.

USD/GBP Exchange Rate: Fed Rate Bets Intensify as USD Climbs Close to 20-Year Highs

The US Dollar Pound (USD/GBP) exchange rate firmed over the past seven days. The US Dollar found continued support from investor bets on further interest rate hikes from the Federal Reserve. Monday saw the currency reach close to 20-year highs amid Eurozone recession fears.

Positive data releases for USD also boosted the currency over the past week. PMI figures for the manufacturing and service sectors both printed above forecasts. Strong US employment figures on Friday tempered gains for the currency however, as signs of easing wage-driven inflation cooled Fed rate hike bets.

August’s inflation figures on Tuesday could see USD slip if the rate cools for a second consecutive month. Speeches from various Fed policymakers could help to underpin the currency however, if they maintain the central bank’s hawkish stance.

EUR/USD Exchange Rate: Gazprom Announces Closure of Nord Stream 1 Pipeline

The Euro US Dollar (EUR/USD) exchange rate slipped last week as Eurozone recession fears continued to weigh on the single currency. EUR had initially started the week on a more optimistic note amid falling gas prices and hawkish bets on action from the European Central Bank (ECB). Above-forecast inflation figures on Wednesday helped to bolster expectations of further rate from the central bank.

News on Friday that Gazprom would be leaving the Nord Stream 1 gas pipeline closed indefinitely saw the Euro shed these gains, however. The cut in supplies added to fears of an energy-driven recession for the trading bloc.

Looking ahead, investors will be closely watching the ECB’s interest rate decision on Thursday. If the central bank hikes rates as forecast, then it could help to bolster the beleaguered Euro.

Gareth Monk

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