Pound Euro (GBP/EUR) Exchange Rate Down as UK Economy Woes Grow
The Pound Euro (GBP/EUR) exchange rate wavered lower this morning as worries about struggling UK businesses weighed on Sterling.
At the time of writing, GBP/EUR was trading at around €1.1578, down 0.25% from the start of today’s European session.
Pound (GBP) Slips as Bleak Winter Looms for UK Businesses
The Pound (GBP) is struggling this morning as GBP investors grow increasingly concerned about the health of UK businesses over the winter period.
Amid the current cost-of-living crisis, consumers are cutting back on spending. This in turn is hammering British retail and hospitality businesses, with many firms worrying about whether they’ll survive the post-Christmas slump in activity.
A recent survey from consulting firm RSM UK has found that consumers are slashing discretionary spending. Jacqui Baker, Head of Retail at RSM, said:
‘Consumers’ finances are taking a hit and they have little choice but to tighten their belts.
‘Our survey showed that nearly every category across retail would be impacted by dwindling discretionary spend this Christmas which is bad news following mixed results during Black Friday.’
Adding to the anxiety, the wave of industrial action across the UK is intensifying. Rail strikes over Christmas are driving up cancellations at a crucial time for the British hospitality industry, which has been hit particularly hard over the past few years.
Awful news for our industry at a critically difficult time. Week of the strikes usually the busiest of the year for our pubs. Much needed business will be lost and impact felt incredibly hard in the months that follow, we need a resolution now. https://t.co/KnLl2vJRGK
— Emma McClarkin OBE (@EmmaMcClarkin) December 5, 2022
These concerns are putting GBP investors on the back foot this morning, subduing Sterling.
Euro (EUR) Muted amid Russia-Ukraine Concerns
Meanwhile, the Euro (EUR) has found its gains against the Pound limited as concerns about the Russia-Ukraine crisis keep the common currency muted.
Yesterday, Russian President Vladimir Putin said that his invasion could be a ‘lengthy process’, raising fears about a years-long conflict in Ukraine. Putin also said that there was a ‘growing’ threat of a nuclear war and that Russia would ‘defend ourselves with all the means at our disposal’.
The Eurozone is particularly vulnerable to negative economic impacts from the Russia-Ukraine war. As a result, these worries are hindering the single currency’s progress.
In addition, the Euro is suffering from its negative correlation with a strengthening US Dollar (USD).
Pound Euro Exchange Rate Forecast: Lagarde Speech in Focus
Later we could see sharp movement in GBP/EUR as European Central Bank (ECB) President Christine Lagarde is due to speak. While Lagarde’s speech is primarily focused on financial stability challenges in the Eurozone, investors will nevertheless be listening for any hints about the ECB’s interest rate decision next week.
If Lagarde is tight-lipped on the subject of rate hikes, EUR could see muted movement. However, if the ECB chief highlights concerns about financial stability or a Eurozone recession, which may prompt less aggressive action from the bank next week, then the common currency could slip.
As for the Pound, the ongoing lack of UK data leaves GBP investors to take their cues from domestic news. More bleak predictions for the British economy over the next few months could keep Sterling subdued.