- Pound (GBP) falls on recession fears
- The energy crisis deepens after Ofgem price rise
- Euro (EUR) rises after hawkish ECB policymakers
- Eurozone inflation is the highlight this week
The Pound Euro (GBP/EUR) exchange rate is falling on Monday after trading roughly flat across the previous week. The pair gained +0.05% last week, settling on Friday at €1.1788, after trading in a range between €1.1759 – €1.1896. At 05:45 UTC, GBP/EUR trades -0.4% at €1.1742.
The pound is trading under pressure as the intensifying energy crisis raises recession fears. Last week Ofgem the energy regulator approved an 80% price hike to energy bills taking the average to £3549 a year from October. The move will push millions of households into fuel poverty, fueling the cost of living crisis.
Goldman Sachs has slashed UK economic growth forecasts and now expects a recession in the final quarter of the year as soaring inflation hits households’ disposable incomes and consumption.
The investment bank forecasts that the UK economy will contract by 0.6% in 2023.
There is no high-impacting UK data due to be released today. There is a public holiday in the UK today so low volume trading could exaggerate moves in the pound. This week is a quiet week for economic data. The focus could be on the UK Tory leadership race before the new leader and the prime minister is announced next week.
The euro is pushing higher after hawkish comments from European Central Bank and after more fiscal stimulus in Germany.
Over the weekend several ECB policymakers voiced concerns over the euro’s devaluation and the impact that this has on inflation. Olli Rehn said that the ECB would be monitoring the situation. ECB speakers also reiterated commitment to hiking interest rates even in the case that the region enters a recession.
Today there is no high impacting eurozone data. This week inflation data from the eurozone will be the key focus. Consumer prices are expected to rise to 9% year on year up from 8.9% and a new record high.
