Pound Euro (GBP/EUR) Exchange Rate Falls amid Concerns over UK Economy
The Pound Euro (GBP/EUR) exchange rate dropped this morning as the UK’s bleak economic outlook pressures the currency pairing. However, the Euro’s (EUR) upside seems limited.
At the time of writing, the GBP/EUR exchange rate is trading at around €1.1329, about 0.3% down from today’s opening levels.
Pound (GBP) Stumbles as Strike Action Intensifies
The Pound (GBP) is on the back foot today as worries about the UK economy once again weigh on GBP exchange rates.
The wave of strike action that has been growing over the past few months is continuing to intensify, with workers demanding larger pay rises to offset the soaring cost of living. However, the government has said it will not renegotiate pay offers, meaning the disruption could last for months.
A new survey has found that one in six UK firms have been affected by recent industrial action, showing the negative impact unresolved pay disputes are having on British businesses.
The same survey also reveals that one in 20 firms plan redundancies over the next three months, while high energy prices and skills shortages are also negatively impacting many companies.
This troubling outlook is denting the Pound today, causing GBP/EUR to slip.
Euro (EUR) Capped by Easing PPI
Meanwhile, the Euro’s upside seems limited amid easing bets for steep interest rate rises from the European Central Bank (ECB).
The Eurozone’s latest producer price inflation reading showed a second month of decline, printing at -0.9% in November following October’s 3% slump.
This adds to signs that inflation is easing in the Eurozone, which could prompt the ECB to take a softer stance at future monetary policy meetings. This in turn seems to be capping EUR’s upside.
Pound Euro Exchange Rate Forecast: Eurozone Inflation in Focus
Looking ahead to tomorrow’s trade, we could see some sharper movement in the Pound Euro pair amid high-impact Eurozone data.
The bloc’s flash inflation rate for December is due to show another cooldown. Economists expect the CPI to ease from 10.1% to 9.7%. This could dampen bets for further steep interest rate rises from the ECB, which in turn could hurt the Euro. Additionally, any surprises could cause significant movement.
Meanwhile, the increasingly risk-sensitive Pound could be affected by the global market mood. In particular, upcoming US economic data could have an impact. If the American data is strong, expectations of more interest rate rises from the Federal Reserve could spark widespread risk aversion, which may dent the GBP/EUR exchange rate.