GBP/EUR Exchange Rate Falling as UK Energy Crisis Concerns Deepen
The Pound Euro (GBP/EUR) exchange rate is down against the Euro this morning as doubt about Liz Truss’s energy support package seeps into trading.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1605. Which has dropped roughly 0.2% from this morning’s opening rate.
Pound (GBP) to Drop as Truss’s Energy Support Package is Questioned
Trade in the Pound is mixed today as economists and investors start to raise questions about Liz Truss’s proposed energy support package.
Sterling initially spiked yesterday in anticipation of Truss’s first speech as PM.
However, the Pound has since shed the majority of these gains as doubt about the energy packages starts to creep in. Leading economist Paul Johnson, director of the Institute of Fiscal Studies, told BBC Today that the package is, ‘very poorly targeted’.
His main concern is that the package will not help those who need it most, with GBP investors also concerned about an expected increase in borrowing to fund the freeze.
There are also concerns Truss’s tax cut plans could also stoke inflationary pressures in the UK.
Sterling will likely remain mixed ahead of the energy package’s announcement later this week. In the meantime ongoing economic uncertainty could also continue to weigh on the Pound as the UK remains at risk of slipping into a recession.
Euro (EUR) Recovering Ahead of Interest Rate Hike?
The Euro is strengthening against most of it’s peers this morning, although it is still recovering from yesterday’s trading session.
The energy crisis deepens in Europe, spurred on by the shutdown of a major gas pipeline from Russia.
Euro trading is being kept afloat by speculation the European Central Bank (ECB) could deliver a 75bps interest rate hike.
Consensus estimates predicts the ECB will only increase rates by 50bps, but the recent surge in inflation has many analysts weighing up the possibility of a more aggressive move from the bank this month
Several ECB policymakers will deliver speeches throughout today. Which could give investors some insight into the bank’s plans ahead of Thursday’s decision.
Expect the Euro to creep higher if policymakers appear receptive to the idea of a 75bps hike.