Euro Pound (EUR/GBP) Exchange Rate Slips Despite Risk-Off Mood
The Euro Pound (EUR/GBP) exchange rate is dropping today despite a retreat in global risk appetite. Fears of a Eurozone recession are continuing to weigh on the single currency, as well as renewed strength in the US Dollar (USD). Bets of fresh rate hikes from the Bank of England (BoE) may also be pulling EUR/GBP lower.
At time of writing the EUR/GBP exchange rate is at around £0.8432, which is down around 0.3% from this morning’s opening figures.
Euro (EUR) Struggles amid Recession Fears
The Euro (EUR) is falling against its major peers such as the Pound and US Dollar (USD) today despite a risk-off mood. The single currency is making gains against riskier currencies, however. A downturn in German bond yields may be contributing to EUR’s decline today.
Continued fears of a Eurozone recession are also likely weighing on the Euro today. A survey of economists conducted by Bloomberg found a majority predicting a technical recession for the trading bloc.
The energy supply crisis in the trading bloc is also likely adding to fears of a downturn today. Speaking today, German Economy Minister Robert Habeck stated that the ‘Russia-dependent energy model has failed’, ad that the country would be shifting to alternative supplies.
On the other hand, predictions of further interest rate hikes from the European Central Bank (ECB) may be helping to underpin the single currency today. The ECB is widely expected to hike interest rates by 0.5% in September
Pound (GBP) Climbs amid BoE Bets
The Pound is rising against most of its rivals today, although losing ground against a resurgent US Dollar. Investors may also be limiting significant bets on the currency ahead of significant data later in the week.
Bets on further interest rate hikes from the BoE may be helping the Pound to climb today. A poll of 51 economists conducted by Reuters this week found a majority in favour of another 0.5% rate hike from the central bank.
Elizabeth Martins at HSBC said:
‘The UK’s problems are supply and inflation driven: allowing inflation to rise even further risks only making the situation worse.’
Political uncertainty and a poor forward outlook for the UK economy may be capping gains for the currency, however.
EUR/GBP Exchange Rate Forecast: Will Eurozone Inflation Bolster ECB Rate Hike Bets?
Looking to the week ahead for the Euro (EUR), Tuesday could see a day of mixed movements for the single currency. A forecast narrowing in the Eurozone’s balance of trade on Tuesday could see EUR rise if figures print as forecast.
Also on Tuesday, a predicted slip in economic sentiment for Germany and the Eurozone could limit any potential gains.
Wednesday’s forecast growth in the Eurozone’s economy for the second quarter may prompt gains for the Euro.
The predicted rise in Eurozone inflation on Thursday could also help the single currency to climb if they recover as forecast.
For the Pound, employment figures on Tuesday could have a mixed impact on Sterling. Unemployment remaining at 3.8% could increase BoE rate hike bets and help the currency to climb.
The predicted sharp drop to average earnings figures could dent confidence in the currency, however. The data may reflect the impact of soaring inflation on UK wage growth.
Wednesday’s inflation figures for July may also have a mixed impact on the Pound. The forecast rise to 9.8% could weigh on the currency amid the UK’s cost-of-living crisis. On the other hand, the figures could increase BoE rate hike bets and push the Pound higher.
