Pound Euro (GBP/EUR) Exchange Rate Remains Weak despite EUR Headwinds
(Updated 15:45, 02/11/22) The Pound Euro (GBP/EUR) exchange rate stayed in the red this afternoon as UK economic concerns pressured the British currency. However, stronger-than-forecast US data may have stemmed the Pound’s (GBP) losses. At the time of writing, GBP/EUR is trading at €1.1609, almost 0.3% down from the start of today’s European session.
Sterling has been under pressure today amid growing worries about the cost-of-living crisis. New data showed that food inflation hit another record high last month, with the squeeze on household budgets likely pushing the UK into a recession.
In addition, worries about industrial action and worker discontent also seem to have damaged the Pound. People across the UK in a variety of industries have downed tools in recent months to demand better pay and working conditions. In the latest bout of strike action, Royal Mail workers will walk out on 24 and 25 November, and again from 30 November to 1 December.
These dates coincide with Black Friday (25 November) and Cyber Monday (28 November) – busy online shopping holidays – in a huge blow to Royal Mail.
Strike action has intensified in recent months as the cost-of-living crisis deepens. If employers and unions are unable to negotiate a deal, the disruption to services could further dent the UK economy.
However, GBP/EUR’s losses were limited. Eurozone data this morning revealed a worsening contraction in factory activity, while the Euro (EUR) also suffered from its negative correlation to the US Dollar (USD) after the latter enjoyed stronger-than-expected employment data in the afternoon.
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Pound Euro (GBP/EUR) Exchange Rate Falls amid UK Income Crunch
The Pound Euro (GBP/EUR) exchange rate ticked lower this morning as new data prompted renewed anxiety over the UK’s cost-of-living crisis.
At the time of writing, GBP/EUR is trading at around €1.1615, down over 0.2% from the start of today’s European session.
Pound (GBP) Falters as Food Inflation Soars
The Pound (GBP) is on the back foot this morning amid increasing concerns over the UK’s cost-of-living crisis.
This morning, the British Retail Consortium (BRC) reported that food prices rose by a record 11.6% year on year last month. This highlights the impact of surging inflation on households, with consumers having to cut back on essential spending as the income crunch worsens.
Helen Dickinson OBE, chief executive of the BRC, commented:
‘Prices were pushed up because of the significant input cost pressures faced by retailers due to rising commodity and energy prices and a tight labour market…
‘While some supply chain costs are beginning to fall, this is more than offset by the cost of energy, meaning a difficult time ahead for retailers and households alike.’
As cash-strapped consumers cut back on spending, retailers are seeing a huge reduction in sales. This in turn could spell further trouble for the UK economy, which may already have gone into recession.
Euro (EUR) Mixed amid Poor PMI and USD Weakness
Meanwhile, the Euro (EUR) is fairly muted this morning following some downbeat data.
The Eurozone’s final manufacturing PMI printed lower than preliminary estimates. The score came in at 46.4 in October, down from 48.4 the previous month, indicating the fourth consecutive month of contraction in factory activity.
The latest data adds to concerns about an impending recession in the Eurozone, as it struggles with similar economic challenges to the UK.
However, the Euro is today enjoying its negative correlation to the US Dollar (USD). The safe-haven Dollar is slightly weaker this morning amid a risk-on market mood, and this is providing the single currency with some support.
As a result, EUR has so far been able to firm against GBP.
Pound Euro Exchange Rate Forecast: US Events to Impact GBP/EUR
Later in today’s session, data out of the US could impact the Pound Euro exchange rate, due to EUR’s negative correlation with USD.
The latest ADP employment change numbers may bolster USD ahead of the Federal Reserve interest rate decision tonight, if they come in strong. Any upside in the US Dollar could weigh on the Euro.
The Fed decision itself could also impact GBP/EUR. As the US is the world’s largest economy, decisions made by its central bank tend to reverberate through global markets. We may see some volatility this evening.