GBP/EUR Exchange Rate Wavers on Mounting Recession Fears
The Pound Euro (GBP/EUR) exchange rate traded narrowly as the UK’s economy stutters and the energy crisis picks up pace in Europe.
At time of writing the GBP/EUR exchange rate is around €1.1557, a 0.18% jump from this morning’s opening levels.
Pound (GBP) Zigzagged as GDP Growth Slower than Expected
The Pound saw mixed success against its rivals after GDP growth for July printed softer than expected. With market forecasts of 0.4% expansion, the UK economy grew by just 0.2%. Despite a vast improvement over a 0.6% contraction, the signs point to a gloomier future.
Even with the £150bn energy bill freeze from Prime Minister Liz Truss’ government, recession fears remain as the economic outlook for the UK remains bleak. Chief Economist at KPMG UK, Yael Selfin said of the soft expansion of the economy:
‘This ties into a downbeat outlook for the UK economy which could see another shallow recession from the end of this year, driven by the ongoing squeeze on households’ income and a rising cost burden for businesses.’
Looking ahead, and with inflation set to hit a fresh 40-year high, bets will be bolstered on the Bank of England (BoE) continuing to raise interest rates. With crucial employment data due to print tomorrow, a continued resilience in the labour market could bolster hopes of a 75bpr interest rate hike at the next policy meeting.
Euro (EUR) Fluctuates amid Soaring Energy Prices
Meanwhile, the Euro struggled for a clear direction today as the energy crisis rumbles on, despite the successful counter-offensive that saw Ukraine take back territory from Russia. With the surprise counterattack undertaken by Ukrainian forces, a wave of confidence rippled through the markets and saw both the Euro and Pound strengthen against the US Dollar.
With Russia stoking the energy crisis in Europe with capping gas supplies, any victory for Ukraine could be a step closer to averting the energy crisis. However, with the energy security crisis still lingering, a recession is still on the table.
Looking ahead, any further developments from the European Commission in regard to imposing a cap on gas prices could see the Euro move. Other proposed measures could come into play, hoping to alleviate the energy crisis. A windfall profit levy on energy companies could provide a much-needed life raft to Europe, and the Euro.