Pound Euro Exchange Rate Firms amid Mounting Energy Crisis Fears
The Pound Euro (GBP/EUR) exchange rate is rallying as gas security fears escalate, despite the ongoing UK political uncertainty and a ‘summer of discontent’.
At time of writing the GBP/EUR exchange rate is around €1.1956, up roughly 0.35% from this morning.
Pound (GBP) Strengthens Despite Domestic Woes
The Pound is strengthening today despite relentless domestic headwinds. A thin data calendar is leaving Sterling susceptible to market moods amid a turbulent political and social landscape.
The ‘summer of discontent’ is set to ramp up as more strikes have been agreed upon by railway workers. Coming after the country saw its railway network ground to a halt as more than 40,000 workers walk out over pay disputes. Mick Lynch, general secretary of the Rail, Maritime and Transport (RMT) has warned that a general strike could happen this year.
Political uncertainty is set to remain through the summer as the final two candidates for Boris Johnson’s replacement continue to throw barbs each other, merely highlighting the deep divide within the Tory party.
Lending some moderate support to the Pound is the growing expectations of a 50bps rate hike next week. The Bank of England (BoE) continues to battle raging inflation, which is expected to reach double digits this year, investors remain confident of a continued aggressive tightening cycle.
Euro (EUR) to Sink Further amid Looming Recession Fears?
The Euro (EUR) is sliding again today as lingering fears of an energy crisis this winter is edging the Euro area towards a recession.
A declining inflation rate in Germany has caused the shared currency to struggle finding demand. CPI figures declined from 7.6% to 7.5%, printing higher than the expected 7.4%.
As the Euro remains muted amid a darkening economic landscape, a flurry of crucial Eurozone data is released on Friday. Inflation and GDP readings for the Eurozone area could exert even more downside pressure on the Euro if forecasts print true. An expected slowdown in the major economies across the Euro area could see the Euro slump further.
Markets will continue to keep an eye on the developing gas crisis after Russia cut crucial supplies to Europe down to 20% capacity. If an alternative gas supply is not found, the Euro area could slip into a recession before winter.