EUR/GBP Exchange Rate Buoyed by Germany Uncertainty
The Euro to Pound (EUR/GBP) exchange rate is ticking lower this morning as ERU investors grow increasingly skittish ahead of Germany’s upcoming general election.
At the time of writing the EUR/GBP exchange rate is trading at around £0.8518, down roughly 0.2% from today’s opening levels.
Euro (EUR) Dented by German Political Uncertainty
The Euro (EUR) is facing an uphill battled today, amidst growing uncertainty over Germany’s upcoming general election.
With Angela Merkel stepping down as Chancellor after 16 years, EUR investors are understandably a little nervous about a Germany and EU without her.
These concerns have been compounded in recent days by fears that Germany could be left in political limbo for months, as coalition talks drag on.
In addition to this, EUR investors appear reluctant to make any aggressive bets this morning, ahead of a speech by European Central Bank (ECB) President Christine Lagarde later this afternoon.
Lagarde is likely to reaffirm the ECB’s current dovish stance, and could send the Euro lower if she continues to downplay the chances of the ECB tightening its monetary anytime in the foreseeable future.
Pound (GBP) Undermined as Soaring Energy Prices Threaten Economic Activity
At the same time, the Pound’s (GBP) gains look to be capped this morning, amidst a surge in energy prices in the UK.
Prices soared by roughly 19% overnight on Wednesday after and electricity cable between Britain and France was shut down after a fire at a National Grid site.
The cable, which can carry up to 2GW of power is expected to remain offline until at least 25 September and is expected to then operate at half capacity until near year.
Unfortunately, this comes at a time when energy prices in the UK are already on the rise due to increased wholesale prices of gas and electricity.
The energy crisis is reportedly already having an impact on UK economic activity, with some steel mills being forced to suspend operations during peak hours, when ‘eye-watering’ energy prices makes it too unprofitable to operate.
This is likely to exacerbate concerns over the trajectory of the UK’s economic recovery, which has already being slowed by staff shortages and supply constraints.
EUR/GBP Forecast: Rebound in UK Retail Sales Growth to Lift Sterling?
Looking ahead to the end of this week’s session, the Euro Pound exchange rate could be pressured by the publication of the UK’s latest retail sales figures.
These are expected to report a rebound in sales growth last month, after recording a massive slump in sales in July.
This rebound in consumer spending will be welcomed by GBP investors on hopes it will further bolster the chances of the Bank of England (BoE) starting to tightening its monetary policy in the near-term.
Meanwhile, the focus for EUR investors will be on the Eurozone’s latest consumer price index tomorrow.
August’s finalised figures look set to confirm that inflation in the bloc surged to a decade high, but in light of the ECB’s current dovish stance any upside in the Euro looks to be limited.