- Pound (GBP) falls as recession fears grow
- UK Prime Minister to be announced on Monday
- Euro (EUR) rises ahead of PPI data
- ECB rate decision next week
The Pound Euro (GBP/EUR) exchange rate is falling lower on Friday, paring gains from the previous session. The pair settled +0.45% higher yesterday, at €1.1602, after trading in a range between €1.1531 – €1.1614. At 08:45 UTC, GBP/EUR trades -0.14% at €1.1578. The pair is set to fall 1.8% across the week.
The pound is heading lower after a tough week. Recession fears have continued to rise across the week as energy prices are set to soar even higher after Ofgem the energy regulator lifted the price cap.
Yesterday manufacturing PMI data showed that the sector contracted by the most since May 2020, when the UK was in the depths of the pandemic. With the cost of living crisis hitting the service sector and the manufacturing sector also shrinking the outlook is bleak.
There is no high-impacting UK data due to be released today. However next week is set to be a busy week for the pound with the announcement of the UK Prime Minister and the BoE hearing in front of the Treasury select committee on Monday.
The euro is rising as investors await the release of the eurozone wholesale inflation data, which is expected to show that inflation at the factory gate rose to 37.3% YoY in July, up from 35.8% in June. High PPI inflation usually means that consumer prices will keep rising.
Attention will now turn to the ECB meeting next week where the central bank is expected to hike interest rates by 50 basis points, if not 75 basis points. The ECB will be attempting to hike rates as the region heads towards a recession.
Data yesterday showed that the eurozone manufacturing activity contracted at a faster rate than originally expected. The manufacturing PMI fell to 49.6, downwardly revised from 49.7. The data is forward looking so suggests that the downturn in Europe could worsen.