Euro Pound (EUR/GBP) Exchange Rate Slides as Eurozone Recession Fears Intensify
The Euro Pound (EUR/GBP) exchange rate is slipping today. The continued energy crisis in the Eurozone is likely pulling the currency pair lower today. Fears of a recession in Germany could also be prompting losses in EUR/GBP.
At time of writing the EUR/GBP exchange rate was at around £0.8466, which is down roughly 0.2% from this morning’s opening figures.
Euro (EUR) Drops as Gazprom Announces Nord Stream 1 Maintenance
The Euro (EUR) is falling against its rivals today amid renewed fears that the trading bloc could see further restrictions to its energy supplies. The drop comes despite a risk-off mood in the markets.
Europe is set to see fresh disruption to supplies through the Nord Stream 1 pipeline. Russian energy supplier Gazprom stated on Friday that the pipeline would see three days of maintenance at the end of August.
The move comes as Gazprom continues to restrict gas flows to 20% of the pipeline’s original capacity. The news is likely continuing to weigh on the single currency today and adding to fears of a Eurozone recession.
A report by Bundesbank released today may add further fuel to these concerns. The German bank signalled that a recession in Germany, the trading bloc’s largest member, is increasingly likely.
In the report, Bundesbank officials said:
‘Overall, the inflation rate could reach 10% in autumn. The upside risk for inflation is high, in particular in the event of a complete stoppage of gas supplies from Russia.’
Pound (GBP) Climbs against Euro Despite Forecasts of 18% Inflation
The Pound (GBP) is dropping against many of its rivals today, although managing to firm against the Euro. Inflation forecasts from US bank Citi may be pushing the currency lower.
The report by Citi, released today, predicted that UK inflation is likely to climb past 18% in the beginning of 2023 due to soaring energy costs. This would be the highest point for the country since 1976 and nine times the Bank of England’s (BoE) target rate.
The pressure the price rises could bring to UK households amid the country’s cost-of-living crisis could also be causing Sterling to fall today.
On the other hand, expectations of further interest rate hikes from the BoE could be underpinning GBP today. The forecasts from Citi also stated that the central bank would likely have to get into ‘restrictive territory’ to combat the high rate of inflation.
EUR/GBP Exchange Rate Forecast: Will Russia Restrict Gas Flows Further?
Looking to the week ahead for the Euro, August’s PMIs for Germany and the Eurozone could pull the single currency lower if Tuesday’s readings print as forecast. Private sectors for both trading areas are predicted to decline in August.
Further data releases from Germany could also prompt movement in the single currency on Thursday. A drop in business confidence for August could pull EUR lower. A slowdown in second quarter growth could have a similar effect on the Euro.
Friday’s further fall in German consumer confidence could see further losses for the single currency and heighten recession fears.
Finally, if gas flows to Europe are further restricted then it could see the Euro fall.
For the Pound, a forecast expansion in the UK’s private sectors could help to bolster the currency if they print as forecast on Tuesday. On the other hand, the softness of the expansion could limit upward movement for GBP.
Distributive trades figures on Thursday could see the Pound slip if they print as forecast, however. August’s figures are forecast to fall for a fourth consecutive month.
