Pound Euro (GBP/EUR) Exchange Rate Extends Downside as UK Worries Continue
(Updated 16:15, 20/12/2022) The Pound Euro (GBP/EUR) exchange rate continued to soften today, wavering down to a one-month low, as a risk-off mood and worries about UK strike action weighed on Sterling. At the time of writing, GBP/EUR was trading at €1.1414, having briefly dipped to €1.1398 – its lowest level since 15 November.
The Pound’s (GBP) downside came as a downbeat market mood maintained pressured on the increasingly risk-sensitive UK currency. Meanwhile, the safer Euro (EUR) was able to catch some bids.
Worries about ongoing industrial action in the UK may have added to GBP’s woes. In addition to strikes in the transport, postal and education sectors, along with firefighters and civil servants, NHS nurses and ambulance drivers are also going on strike. Prime Minister Rishi Sunak has ruled out reviewing pay offers, meaning the strikes could last for months.
Industrial action would likely further damage the UK’s economy, which is already in recession. This added to the downside pressure on GBP/EUR today.
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Pound Euro (GBP/EUR) Exchange Rate Stumbles amid Absence of Data and Downbeat Sentiment
The Pound Euro (GBP/EUR) exchange rate has fluctuated lower today as thin trading conditions leave the currency pair to trade according to market sentiment.
At the time of writing, the GBP/EUR exchange rate is at around €1.1423, down 0.25% from today’s opening level.
Pound (GBP) Wavers Lower amid Lack of Data
The Pound (GBP) has fluctuated lower today as a lack of UK economic data leaves Sterling exposed to choppy trade. In the absence of data, a downbeat market mood is also pressuring the increasingly risk-sensitive UK currency.
Meanwhile, domestic news may also be denting Sterling. As public sector pay lags far behind inflation, workers across multiple sectors are on strike to demand better pay and conditions.
Traders could be growing concerned about the impact ongoing industrial action could have on the UK’s economy, which is likely already in a recession.
Euro (EUR) Capped despite USD Weakness
Meanwhile, safer the Euro (EUR) is finding some success amid the risk-off market mood. In addition, a broad-based weakness in the US Dollar (USD) may be adding to EUR’s upside, due to the currencies’ negative correlation.
However, the common currency may be finding its gains limited following a larger-than-expected decline in German wholesale inflation last month. This morning’s PPI reading for November showed that prices declined by 3.9%, a bigger drop than the forecast fall of 2.5%
Signs that German producer price inflation is easing could dampen European Central Bank (ECB) interest rate rise bets. Although the ECB sounded hawkish at its last meeting, policymakers did say they would be guided by data at upcoming rate decisions.
Pound Euro Exchange Rate Forecast: GBP/EUR to Extend Downside?
Looking ahead, domestic headlines from the UK could continue to drive movement in the Pound. If worries about strike action persist, GBP/EUR may struggle.
Risk appetite could also impact the currency pair, with the riskier Pound likely to fall further against the safer Euro if the market mood remains downbeat.
Turning to the Euro, developments around the Russia-Ukraine war could have an impact. Recently, analysts have grown concerned that Russia will launch a new offensive early next year. Russian President Vladimir Putin is seemingly trying to drag Belarus into the fight, having met with Belarusian President Alexander Lukashenko – a staunch Putin ally – yesterday. Any new updates on how Russia plans to press ahead with its invasion could hurt EUR.
Data-wise, the Eurozone consumer confidence flash could support the single currency later today. Economists expect another improvement in morale, which may boost the Euro.