- Pound (GBP) falls on recession fears
- UK second-tier data due
- Euro (EUR) rises hawkish ECB comments
- German inflation data is due
The Pound Euro (GBP/EUR) exchange rate is edging lower for a fourth straight day. The pair settled -0.7% lower yesterday, at €1.1708, after trading in a range between €1.1696 – €1.1784. At 05:45 UTC, GBP/EUR trades -0.03% at €1.1704.
The pound came under pressure yesterday as recession fears continued to build across the UK. As worries over soaring energy prompted concerns over household bills and consumer spending, the pound fell lower. Reading the market’s mood, Goldman Sachs slashed its fourth-quarter economic growth outlook.
Today there is no high impacting UK economic data. Second-tier data on mortgage approvals, consumer credit, and net lending will be in focus but are unlikely to drive the price significantly.
Attention will also be on the leadership battles between Rishi Sunak and Liz Truss, which continues to play out. Lizz Truss said she could cut VAT by 5% if she wins. The results are due on 5th September.
The euro jumped higher across the board yesterday after hawkish comments from European Central Bank policymakers over the weekend. Policymakers expressed concern over the rapid devaluation of the common currency.
Adding to the upbeat mood was news that natural gas prices plunged 20% in Europe on news that Germany’s gas storage was filling up faster than expected ahead of the winter months. The eurozone’s largest economy will reach its October gas storage target next month.
The race to fill storage came after Russia cut supplies through the critical Nord Stream pipeline.
Attention now will turn to German inflation, which is expected to rise to 8.9%, up from 8.5%, and eurozone consumer confidence which is also likely to improve. Rising inflation and an improving consumer mood could lift the EUR higher.