- Pound (GBP) steadies after steep losses last week
- UK composite PMI data is due & UK PM announcement
- Euro (EUR) falls as energy
- Eurozone retail sales, PMI & investor sentiment data is due
The Pound Euro (GBP/EUR) exchange rate is rising on Monday after falling last week. The pair lost 1.9% across the previous week, settling at €1.1565 on Friday, after trading in a range between €1.1522 – €1.1782 across the week. At 05:45 UTC, GBP/EUR trades +0.20% at €1.1581.
The pound fell last week as fears over the economic outlook for the UK weighed on demand for the currency. After the British Energy regulator, Ofgem lifted the cap on energy prices by 80% households’ disposable income will be reduced significantly, which threatens to accelerate the fall into recession.
The new Prime Minister is due to be announced today, and Liz Truss is expected to win. Truss vowed to bring support to households through the cost of living crisis as soon as she takes power. However, the pound appears unconvinced by talk of fiscal support, which could worsen the inflation picture.
On the data front, UK services and composite PMI data are expected to show that UK business activity expanded in August but at a slower pace than in July. The Composite PMI is expected to slip to 50.9, from 52.1. The level 50 separates expansion from contraction.
The euro rose last week after hawkish comments from European Central Bank policymakers at the Jackson Hole Symposium boosted hopes that the central bank could hike rates aggressively this week.
The ECB meeting comes as the economy faces its worst crisis since its formation as Russia uses gas as a weapon. Sanctions on Moscow led Russia to cut gas supplies to Europe via the Nord Stream 1 pipeline indefinitely.
Gas shortages have pushed European gas prices to record high which is set to fuel inflation further. Gas rationing across Europe this winter is looking highly likely.
There is plenty of data to keep investors focused today, including Eurozone composite PMI data, investors’ sentiment figures and Eurozone retail sales. Retail sales fell -1.2% MoM in June and are expected to rise 0.4% in July.
