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Pound Euro Exchange Rate to Sink on Mounting UK Economic Fears?

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GBP/EUR Exchange Rate Wavers as UK Domestic Woes Linger

The Pound Euro (GBP/EUR) exchange rate is struggling for demand this morning as a thin trading calendar left the pairing exposed to market sentiment and domestic issues.

At time of writing the GBP/EUR exchange rate is around €1.1471, relatively unchanged from this morning.

Pound (GBP) Undermined by Recession Concerns

The Pound is trading erratically today as investors remain cautious around the condition of the UK economy amidst a lack of data.

Retailers are struggling to find the festive cheer as a myriad of pressures are seeing footfall and sales slump. Cold weather, strikes, and the living cost squeeze is seeing a subdued shopping period in the run up to Christmas. With declining retail sales reported by the Office for National Statistics (ONS), analysts are not predicting much improvement for the rest of the year.

Looking ahead, Chancellor Jeremy Hunt has announced that he will be presenting the Spring Budget on March 15. Hunt also commissioned the Office for Budget Responsibility (OBR) to prepare an accompanying fiscal and economic forecast. Having previously announced a string of tax measures and refined public spending, Hunt is hoping to reassure investors with a recovering UK economy.

Euro (EUR) Fluctuates Despite Hawkish ECB

Meanwhile, the Euro (EUR) is struggling to find a clear direction today and is wavering against most of its rivals.

A surprise uptick in business confidence in Germany was not enough to lift the Euro, despite reaching its highest level since August. Amidst sky-high inflation and a lingering threat of energy crisis, businesses are becoming less pessimistic of the future. The Institute for Economic Research (IFO) economist Klaus Wohlrabe highlights the positivity:

‘The likelihood of a recession has reduced with today’s IFO data. Business climate improves across nearly all sectors, (with) 50.7% of businesses complained about supply chain bottlenecks in Dec vs. vs 59.3% in November.’

Looking ahead, a lack of major data could see the Euro trade on economic sentiment. Tomorrow could see further movement with a speech from the vice president of the European Central Bank (ECB) Luis de Guindos. Any further hints towards the central bank’s monetary policy going forward could see the Euro move.  Following hawkish comments from across the board, investors could be buoyed with further aggressive rhetoric.

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