Pound Euro Exchange Rate News: GBP/EUR Wavered amid Mixed Eurozone Data and the UK’s Rising Living Standards Crisis

Modified: Thursday, 1 September 2022 12:21 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Wavered amid Mixed Eurozone Data and the UK’s Rising Living Standards Crisis

Pound (GBP) Pressured by Surging Living Standards Crisis

The Pound (GBP) struggled for a clear direction on Thursday amidst the persistent headwinds of inflation and recession fears, compounded by the soaring energy bill crisis.

In the final hustings of the current leadership campaign, Liz Truss and Rishi Sunak addressed 6000 Tory members at Wembley Arena before polling closes on Friday. Truss ruled out energy rationing and failed to support calls for windfall tax on energy companies. Experts warn that blackouts would be a possibility if gas shortages come to fruition.

With fears of millions of households being plunged into poverty over the winter, the inaction of the UK government is concerning both investors and charities. The Resolution Foundation has published a report in detailing how the living standards crisis will last through to next year. The standard of living organisation warned that if substantial intervention from the government is not undertaken quickly, it would be the deepest living standard squeeze in a century. They tweeted:

‘With the current cost-of-living crisis being felt hardest by low-income households, absolute poverty is on track to rise by three million over the next two years), while relative child poverty is projected to reach its highest level (33% in 2026-27) since the peaks of the 1990s.’

Euro (EUR) Fluctuated on a Flurry of Mixed Data

The Euro (EUR) saw mixed success against its rivals on Thursday as unemployment figures joined a flurry of PMI data for the Euro, along with retail sales for Germany.

Unemployment figures for the Eurozone printed dropped to 6.6%, meeting expectations of the same, maintaining the lowest unemployment level on record.

The manufacturing sector in the Eurozone fell to 49.6, the second month of contraction after difficulties encountered in Germany, Europe’s largest economy. With preliminary data showing 49.7, just shy of stagnation, the reading fell further amidst the persistent supply issues. Meanwhile, a surprise expansion in French manufacturing lent some minor support.

Elsewhere, German retail sales showed a much-improved figure compared to forecasts as MoM sales for July increased by 1.9% versus an expected 0%. YoY also printed better than expected, with expectations of a -6.5% drop, sales compared to this time last year were slightly improved at -2.6%.

Keeping a firm lid on any further gains by the Euro is the ongoing energy security crisis, which could potentially tip the Euro area into a recession. The European Commission has stated that they are looking at capping energy prices and to reduce demand for electricity to tackle surging energy costs. Mechthild Wörsdörfer, Deputy Director General of the Commission's energy department, said:

‘There is work on emergency measures on electricity prices. There might be also something on demand reduction for electricity.’

GBP/EUR Exchange Rate Forecast: Energy Crises to Further Impact the Pairing?

Looking ahead, with data remaining thin on the ground for the rest of Thursday, the Pound Euro exchange rate could see further fluctuations on the persistent turbulent situations both the EU and UK find themselves in.

Any further developments of UK government fiscal support could see a much-needed boost for the Pound, but considering the bleak economic outlook, it might not be enough.

Elsewhere, Friday sees the release of German balance of trade, as well as PPI data for the Eurozone.

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TAGS: Pound Euro Forecasts