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GBP/EUR to Fall amid Increasing UK Recession Fears?

Pound coin on a Euro banknote

Pound Euro (GBP/EUR) Exchange Rate Slips as UK PMIs Spark Recession Anxieties

The Pound Euro (GBP/EUR) exchange rate weakened on Friday, following signs of further contraction in the UK private sector.

At the time of writing, GBP/EUR traded at around €1.1506, a fall of just over 0.2% from the morning’s opening rates.

Recession Anxieties to Dent GBP Further?

Following on from a disappointing slate of private sector indexes, the Pound (GBP) may be unable to recover from staunch losses.

The morning’s release showed further contractions in both manufacturing and service sectors, which sparked additional recession anxieties among GBP investors. This came in tandem with yesterday’s surprise pause from the Bank of England (BoE).

Furthermore, the latest retail sales data indicated an improvement in sales, but missed forecasts by a hair, disappointing investors. Because of this, Sterling is unlikely to be able to recover over the course of today’s session, despite an upbeat market mood.

Looking ahead to early next week, the Confederation of British Industry (CBI) are due to release September’s distributive trades data.

While economists anticipate an improvement, the reading is expected to remain deep in contractionary territory. Because of this, Sterling may be unable to gain ground against its peers.

Elsewhere, market mood could play a roll in shaping Sterling rates. As an increasingly risk-sensitive currency, the Pound may need to rely on a shift to bullish trade in order to strengthen against safer assets, such as the Euro.

EUR to Struggle amid Downbeat Private Sector Data?

Over the course of today’s session, the Euro (EUR) may continue to struggle against most of its peers, as investors continue to pore over the latest private sector indexes.

While the services index showed that activity had improved in September, further declines in the bloc’s manufacturing sector offset the positivity. With this in mind, investors are growing more concerned over a possible recession.

Additionally, this may lead to further paring back of interest rate hike bets. The European Central Bank (ECB) appeared to turn dovish with their recent announcement, and further economic woes may compound this perception.

Looking ahead, Monday brings the release of the latest German Ifo business climate index, reflecting sentiment in September.

Economists forecast this to have edged lower on a monthly basis, falling from 85.7 to 85. If it prints accurately, it may weigh heavily on EUR by showing further deteriorations in business confidence in the bloc’s largest economy.

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