Pound Euro (GBP/EUR) Exchange Rate Firms Despite UK Recession Concerns

November 21, 2022 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Firms Despite UK Recession Concerns

Pound Euro (GBP/EUR) Exchange Rate Rises Despite Investor Recession Concerns

The Pound Euro (GBP/EUR) exchange rate firmed on Monday, despite investors concern about the impact of Chancellor Jeremy Hunt’s Autumn Statement.

As such, GBP/EUR was trading at around €1.1537 at the time of writing, an increase of roughly 0.2% from Monday’s opening rates.

Pound (GBP) Mixed as Investors Analyse Autumn Statement

The Pound (GBP) saw mixed trade on Monday, as investors continued to pour over the details and implications of Chancellor Jeremy Hunt’s Autumn Statement.

With the Autumn Statement including a package of £55bn in terms of spending cuts and tax hikes, measures to grow the UK economy seemed lacking to investors.

The Confederation of British Industry Director General, Tony Danker, was especially critical of the Autumn Statement. He stated that: ‘Growth is a precondition to a stable society. Without growth the NHS gets worse not better. People’s lives get worse not better. And we lack the resources we need to transform ourselves to a zero-carbon world. There was really nothing there that tells us the economy is going to avoid another decade of low productivity and low growth.’

Furthermore, the recession continued to weigh on the minds of investors. Closures in the restaurant sector of the UK economy rose by 60%, with 453 closures occurring in the last 3 months alone.


The ever-rising input costs, finance costs and falling demand are creating a ‘toxic mix’ which is hurting the sector more than the Covid19 pandemic. As such, investors opted to move away from Sterling during Monday’s session, despite modest gains against the Euro.

Euro (EUR) Weakens as German PPI Falls Dramatically

The Euro (EUR) weakened on Monday as German PPI data for October printed a substantial decrease.

Producer Price Inflation for the bloc’s largest economy printed at -4.2%, significantly below the previous month’s reading of 2.3% and far beyond the forecast of 0.9%. The data provided some optimism for investors, as it pointed to inflation approaching a peak.

However, it simultaneously stoked fears of a recession in the Eurozone due to the size of the drop, and served to further diminish hopes for higher rate hikes from the European Central Bank (ECB).

Inflation remains a key pressure for the Eurozone’s economy, with other data releases showing little signs of slowdown. However, Monday’s release for the bloc’s largest economy does paint a hopeful picture that consumer inflation may soon begin to slow.

Further adding to the Euro’s struggles on Monday was a risk-averse market mood. The shift in sentiment came as Russia continued to barrage Ukraine with missile strikes on Sunday, and a continuing rise in Chinese Covid cases placed a cap on industrial demand for oil.


This was explained further by Marios Hadjikyriacos, a Senior Investment Analyst at XM. He stated: ’The outlook for global fuel demand continues to deteriorate, with China’s intensifying covid outbreaks and nearly every piece of incoming data pointing to a recession in the Eurozone and United Kingdom. On the supply side, even though OPEC has announced plans to slash production, it was not enough to nullify the prospect of demand destruction. There is also chatter that Europe is overloaded with oil, as refiners ordered as much as possible ahead of the ban on Russian crude that will come into force early next month.’

Pound Euro (GBP/EUR) Exchange Rate Forecast: PMI Readings to Fluctuate Pairing?

Looking ahead for the Pound Euro (GBP/EUR) exchange rate, Wednesday sees the release of private sector PMI flashes for both currencies.

With services and manufacturing expected to contract for both the EU and UK, the data may inject fresh volatility into GBP/EUR. However, as both point to slowing economic growth, they may contribute to a shift in risk-sentiment which could further wound the Euro.

Elsewhere, the European Central Bank’s (ECB) meeting minutes are due to be published on Thursday. The publication could see a boost for EUR should they contain any hints to further tightening from the Bank.

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