Pound Euro Exchange Rate News: GBP/EUR Wavered as UK Mortgage Approvals Slumped

November 29, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Wavered as UK Mortgage Approvals Slumped

Pound (GBP) Quiet as Plunging Mortgage Approvals Highlight Slowing Economy

The Pound (GBP) failed to establish itself on Tuesday amid a wavering risk sentiment in the global market. With Covid protests rocking market confidence, investors soon jumped ship and preferred safe-haven currencies. However, an increase in China’s vaccination programme lent support to hopes of an easing of the zero-Covid policy.

Back home, however, the latest mortgage data from the Bank of England (BoE) showed the housing market is cooling as recession pressures take hold. Mortgage approvals fell to the lowest levels since June 2020, as the impact of the disastrous mini-budget caused a turbulent market. Concerns that the UK economy continues to weaken, a slide in mortgage approvals is likely to weigh on GBP investors. Karim Haji, Head of Financial Services at KPMG, said of the concerning data:

‘It’s not hugely surprising, being a combination of the higher rates attached to products on the market, which have made them less affordable for many, and caution among consumers about taking on large new financial commitments in such a gloomy environment.’

Meanwhile, further industrial action continues to exert downward pressure on the UK economy, and in turn the Pound. UK firefighters are to vote on taking industrial action, amid disputes over pay and working conditions. The Fire Brigade’s Union (FBU) has announced the historic ballot after control staff and firefighters rejected a 5% increase to their wages. Matt Wrack, FBU General Secretary, said that workers have been left with no choice but to vote on industrial action:

‘This is an historic ballot for firefighters and control staff. We are rarely driven to these lengths.

‘Nobody wants to be in this position. But after years of derisory pay increases and a pay offer that is well below inflation firefighters’ and control staff’s living standards are in peril.’

Euro (EUR) Quiet amid Softening German Inflation Data

Meanwhile, the Euro (EUR) also struggled for a clear direction on Tuesday, as headline CPI reading for Europe’s largest economy came in softer than expected.
German inflation came in at 10%, missing forecasts of 10.4%.

Elsewhere, weighing on the Euro, were comments from European Central Bank (ECB) Vice President Luis de Guindos. Speaking via video conferencing, Guindos commented that the central bank must continue to monitor underlying inflation, and hinted at a slowing of monetary policy. The vice president added:

‘For the headline (inflation), I think that we're there in terms of the peak, perhaps one decimal point up or down, it will be hovering, but I think that in the first half of next year we will see a decline.’

Capping any further losses were the better-than-expected economic sentiment in the Eurozone. The indicator ticked higher to 93.7, against expectations of 93.5. But with the score remaining close to a two-year low, the pressures of surging prices and high interest rates still point to a looming recession.

GBP/EUR Exchange Rate Forecast: Eurozone Inflation to Weigh on the Euro?

Looking ahead, the Pound Euro exchange rate could see further fluctuations with the release of headline CPI inflation for the Euro area. A forecasted softening to 10.4% could see rate hike expectations slash once more.

Meanwhile, the Bank of England (BoE) Governor Andrew Bailey is expected to make a speech in front of the House of Lords Economic Affairs Committee later on Tuesday. Any hawkish comments could see the Pound slide.

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TAGS: Pound Euro Forecasts