GBP/EUR: Pound Targets €1.16 On Euro Weakness
  • Pound (GBP) rises for a second day on hopes of fiscal support
  • A draft £130 billion energy support programme is expected
  • Euro (EUR) falls German order drop 1.1% MoM
  • ECB rate decision is due on Thursday

The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair settled +0.3% higher yesterday at €1.1593, after trading in a range between €1.1529 – €1.1609. At 08:45 UTC, GBP/EUR trades +0.16% at €1.1612.

The pound is charging higher, adding to gains from the previous session after Liz Truss was announced Prime Minister. She won the Tory party leadership battle against Rishi Sunak and will be the third female Prime Minister.

After visiting the Queen in Scotland, Truss will crack on with tackling the disastrous state of the UK economy. She has inherited a dire economic picture similar to the 1970s with soaring inflation, high energy prices, and stalling growth.

The pound is impressed by draft plans for a £130 billion energy support package which looks to keep household energy bills at current levels, even as gas prices have continued to rise.

Truss has promised tax cuts and plenty of support to the UK economy, which could embolden the BoE to hike interest rates more aggressively to tame inflation.

The BoE is due to meet next week to discuss monetary policy.

There is no high impacting UK economic data due to be released today. Yesterday the composite PMI data showed that business activity slowed by more than expected to 46.9 in August, below the crucial 50 level.

The euro is heading lower as investors continue digesting the news that Russia has cut off gas supply along the Nord Stream 1 pipeline.

German factory orders fell by more than expected in July. Orders dropped 1.1% month on month, down from -0.4% in June and below the -0.2% forecast. Monthly industrial orders have been falling since February, stoking recession fears.

The data comes after the German composite PMI in August showed that business activity fell deeper into contraction, dropping to 47.6. The outlook for the German economy is bleak as rising inflation and interest rates put a growing strain on households and businesses.