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GBP / EUR exchange rate plunges as UK fuel shortages continue
The euro pound exchange rate collapsed today, abandoning gains generated yesterday by the Bank of England (BoE) and the German elections. GBP / EUR fell more than 1% to € 1.1588 amid UK economic concerns.
Gasoline shortages across the UK are fueling fears of economic disruption, and rising gasoline prices to an 8-year high add to concerns over inflationary pressure on prices in the UK .
However, the euro’s gains are capped following the inconclusive outcome of German elections and natural gas shortages in Europe.
British pound (GBP) falls amid UK fuel crisis
The pound is down against the euro as the UK fuel crisis continues to weigh on sterling sentiment.
With the growing threat of economic disruption as employees take time off work, deliveries are delayed and supply chains come under additional pressure, the pound has collapsed and foregone yesterday’s gains.
The UK government has responded to the crisis by putting the military on hold to help with delivery and increasing the number of short-term visas for foreign workers to tackle the shortage of heavy truck drivers.
However, oil prices have already hit the 8-year mark, prompting further fears of worsening inflationary pressures in September, with fuel making up a large share of the Consumer Price Index (CPI) basket.
It comes after BoE Governor Andrew Bailey said yesterday that inflation had strengthened the case for higher interest rates. The prospect of tightening monetary policy early next year has boosted the pound’s exchange rate, but fears of slowing economic growth now appear to weigh on the pound.
Bailey said:
“Putting it all together, the recovery has slowed down and the economy has been rocked by additional shocks.
“The shift in demand for goods towards services, the Covid having faded in terms of economic impact, has not yet taken place on the expected scale. Meanwhile, supply bottlenecks and labor shortages have weighed on production and continue.
“Meanwhile, just to reiterate, the recovery is weakening. Much therefore depends on the efficiency with which supply capacity is rebuilt and over what duration, and on the evolution of the labor market. These are really difficult projects.
Euro (EUR) strengthens in risk-free trade
Euro exchange rates are trending upward today in a global climate of risk aversion, despite the uncertainty surrounding the outcome of the German election and the energy crisis threatening the economic recovery of the Eurozone.
The single currency is benefiting from the demand for safe havens as the global appetite for risk has diminished. Following reports that industrial production in China has been affected by power outages due to coal shortages and that Europe is hit by soaring natural gas costs, concerns about growth global growth.
In addition, the latest GfK consumer confidence index data in Germany for October supported euro exchange rates earlier today, with the figure reaching its highest level since April 2020.
GBP / EUR exchange rate forecast: energy crisis will boost volatility
The euro pound exchange rate may experience more volatility this week as the UK fuel crisis looks unlikely to abate and high impact Eurozone data looks set to boost the movement of the euro. ‘euro.
As long as the fuel crisis threatens to disrupt amid soaring gas prices, the pound could remain under pressure.
Meanwhile, Eurozone economic sentiment, unemployment and inflation data could fuel GBP / EUR volatility.
Although unemployment across the bloc is expected to fall to 7.5%, weakening economic sentiment and rising inflation to 3.3% in September, from 3% in the previous month, could weigh on the economy. ‘euro.
After the President of the European Central Bank (ECB), Christine Lagarde, was indifferent to inflationary pressures in a speech yesterday, the euro may find it difficult to orient itself on the accommodative outlook.
At the same time, UK data is unlikely to cause a significant move unless the final UK GDP growth rate for the second quarter sees an unexpected downward revision.
