Pound Euro exchange rate weakens amid UK economic concerns

The Pound Euro exchange rate traded in a wide range this week, the pairing fluctuating amid UK economic woes and European gas shortage fears. 

Pound slips amid grim UK economic outlook

The Pound Euro exchange rate got off to a mixed start this week, with Sterling briefly strengthening before quickly succumbing to ongoing concerns over the Bank of England’s (BoE) bleak economic forecasts and recession warning. 

Reports that annual energy bills in the UK could top £4,200 at the start of next year then triggered another downturn in the Pound, as it raised fresh concerns over the UK’s cost of living crisis. 

Sterling then attempted another short-lived rally on the back of an improving market mood and hawkish comments from BoE deputy governor, Dave Ramsden. 

However the GBP/EUR exchange rate quickly fell back amid concerns over a lack of action from the government regarding the UK’s energy price crunch. 

Closing out the week was the publication of the UK’s latest GDP figures. These saw the Pound firm as the contraction in the UK economy in the second quarter was smaller-than-expected. 

Meanwhile, the euro fluctuated at the start of the week after the Eurozone Sentix investor confidence showed a smaller-than-expected improvement in August. 

The Euro’s negative correlation with the US Dollar saw EUR exchange rates the strengthen in the latter half of the week as a softer-than-expected US inflation print triggered a sharp USD selloff. 

BoE interest rate decision centre stage next week 

Turning to next week’s a glut of high-impact UK macroeconomic releases may see the Pound more data driven next week. 

The spotlight likely to be on the UK’s consumer price index, which Sterling sentiment potentially suffering if another spike in inflation exacerbates cost of living concerns. 

Also of note will be the UK’s latest jobs report. Assume unemployment remained unchanged the main focus will be on June’s average earnings figures, which could drag on GBP exchange rates if wage growth continued to lag well behind inflation. 

The end of the week will then see the publication of the UK’s latest retail sales figures, where another slump in sales growth may place additional pressure on Sterling. 

For EUR investors the focus at the start of the week will be on Germany’s latest ZEW economic sentiment index. If morale in the Eurozone’s largest economy continued to deteriorate this month the Euro could fall. 

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