Pound Falls as Real Pay Fails to Match Soaring Prices, Euro Climbs as Gas Prices Slip

  • Pound slips as Felixstowe dock workers announce second wave of industrial action

  • Euro bolstered by reports of Ukrainian counterattacks

  • US Dollar leaps as above-forecast inflation figures boost Fed rate hike bets

  • UK enters period of mourning following death of Queen Elizabeth II

GBP/EUR Exchange Rate: Liz Truss Announces Energy Support Plans

The Pound Euro (GBP/EUR) exchange rate stumbled over the course of the past seven days. The Pound suffered on Wednesday after dovish comments saw investors pare back their Bank of England (BoE) rate hike bets. The announcement of Liz Truss’ energy support plan on Thursday helped GBP reverse some these losses, however.

The death of Queen Elizabeth II on Friday saw subdued bets on the Pound as the UK entered a period of national mourning. News of surprise counterattacks from Ukrainian forces buoyed the currency. News of further industrial action at the container port of Felixstowe pulled GBP lower, however.

The UK’s state of mourning may continue to limit the Pound’s movements in the coming week. Any further updates on Liz Truss’ energy support plans may bolster the currency.

GBP/USD Exchange Rate: Unemployment Rate Falls to Lowest Point since 1974

The Pound US Dollar (GBP/USD) exchange rate rose over the past week. Sterling saw a slight rise on Monday amid an uptick to GDP figures in July. The UK’s economy expanded by a slight 0.2% with economists warning of a potential recession in the third quarter.

Employment figures also saw GBP edge higher on Tuesday. Unemployment fell to its lowest point since 1974, potentially strengthening bets on further BoE hikes. An increase in core inflation on Wednesday also added to these expectations. Real pay on Tuesday failed to keep pace with inflation however, which capped gains.

Looking ahead, retail sales figures on Friday could pull the Pound lower if figures slide as forecast. The sector’s poor performance could also add to recession fears.

USD/GBP Exchange Rate: Hot Inflation Figures Bolster Fed Rate Hike Bets

The US Dollar Pound (USD/GBP) exchange rate dipped over the past seven days, although made a drastic recovery from earlier lows. Bets on further interest rate hikes from the Federal Reserve as well as a risk-off mood kept USD underpinned early in the week. A shift to riskier trading undermined the currency as the week went on, however.

The US Dollar soared following inflation figures on Tuesday, climbing close to its highs from the previous week. August’s figures printed above forecasts, cementing Fed rate hike expectations and prompting further bets on USD.

If retail sales remain unchanged on Thursday, then it could dampen USD’s momentum. Investors will be most keenly awaiting the Fed’s interest rate decision on Wednesday. A sizeable rate hike could boost the US Dollar.

EUR/USD Exchange Rate: ECB Slashes Growth Forecasts after 0.75% Rate Hike

The Euro US Dollar (EUR/USD) exchange rate rose over the past seven days. Above-forecast GDP figures on Monday strengthened bets on action from the European Central Bank (ECB) ahead of Thursday’s interest rate decision.

The single currency slipped following the ECB’s 0.75% rate hike. The ECB slashed growth forecasts and warned of a recession for the Eurozone which weighed on EUR. The trading bloc’s energy crisis also kept pressure on the Euro, although military successes in Ukraine helped to underpin EUR.

Looking to the coming week, the final reading of August’s inflation figures on Friday could boost EUR if they print as forecast. Further fluctuations in gas prices and military developments in Ukraine could also prompt movement in the Euro.

Gareth Monk

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