Pound Euro (GBP/EUR) Exchange Rate Rangebound amid USD Pullback
The Pound Euro (GBP/EUR) exchange rate is trading within a narrow range today. Upward movement for the currency pair may be being limited by soaring energy cost forecasts for the UK, as well a subdued US Dollar (USD).
On the other hand, hawkish comments from BoE policymakers may be underpinning GBP/EUR today.
At time of writing the GBP/EUR exchange rate is at around €1.1844, virtually unchanged from this morning’s opening figures.
Pound (GBP) Gains amid Hawkish BoE Rhetoric
The Pound (GBP) is edging higher against many of its rivals today. Bets on further interest rate hikes from the Bank of England (BoE) may be helping to support Sterling.
Speaking on Tuesday, BoE Deputy Governor Dave Ramsden signalled that ‘its more likely than note’ that the central bank would continue to raise interest rates.
A surprise uptick in July’s retail sales figures could also lend support to the currency today. Sales rose by 1.6% versus a forecast fall of -1.1%. Purchases of summer clothes and air conditioners, likely prompted by the country’s recent heatwave, helped to bolster the figures.
Economists warned that July’s figures could be the ‘lull before the storm’ however, with soaring inflation likely to limit non-essential spending in the coming months. The warnings are likely limiting gains to the near-term.
Forecasts that UK energy bills could surpass £4200 in January 2023 may also be weighing on GBP today. The UK government has faced criticism from business and opposition leaders over its lack of a concrete response to the potential impact.
Euro (EUR) Ticks Higher Despite Energy Supply Fears
The Euro (EUR) is firming against its competitors today. A pullback in the US Dollar may be helping to push risk-off flows toward the single currency.
On the other hand, gains for EUR may be limited today by amid fears of a Eurozone energy crisis. Investors remain concerned that the trading block could fall into a recession.
Figures released today likely added to these fears after a report by the Institute for Employment Research (IAB) indicated that the German economy could see a €260B loss by 2030. The IAB’s report highlight the war in Ukraine and soaring energy costs as contributing factors.
Gas supplies through the Nord Stream 1 pipeline remain at 20% of capacity after Russian supplier Gazprom imposed restrictions. Gazprom cited Western sanctions as the main factor.
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