Pound Euro (GBP/EUR) Exchange Rate Slips as Strikes Impact UK Businesses

December 8, 2022 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Slips as Strikes Impact UK Businesses

Pound Euro (GBP/EUR) Exchange Rate Slips as Strikes Impact UK Businesses

The Pound Euro (GBP/EUR) exchange rate fell on Tuesday, as the waves of industrial action on the UK continued to impact businesses across the country.

At the time of writing, GBP/EUR traded at around €1.1582, a decline of roughly 0.3% from Thursday’s opening rates.

Pound (GBP) Struggles as Industrial Action Affects UK Businesses

The Pound (GBP) struggled on Thursday, as a lack of macroeconomic data led investors to focus on the impact the waves of strikes across the UK were beginning to have on businesses.

Following on from Monday’s news that greetings card company Moonpig were seeing dented profits due to strike action from Royal Mail workers, the UK’s hospitality sector demonstrated how transport strikes were beginning to affect their businesses.

Kate Nicholls, Chief Executive Officer of UKHospitality, stated that cancellations for Christmas parties and other get togethers had increased by 30%. She further added:
‘We’re getting into omicron territory. A lot of people are saying it’s too difficult to come in, and if you’re writing off next week, you might as well write off the week after. So it’s going to be an early Christmas shutdown.’

The picture became bleaker for the key section of the UK economy and added to worries that many businesses may face closure during the coming months. With many pubs, restaurants and bars already feeling the pressure from increasing energy costs and staff shortages, the sustained fall in bookings is prompting a decidedly grim outlook.


Further weighing on GBP sentiment was the news that UK consumer spending had fallen this season. The cost-of-living crisis is continuing to hold a firm grip on household finances, leading to a 16% drop in average spends for Christmas.

Euro (EUR) Muted by Ukraine-Russia Escalation Fears

The Euro (EUR) endured mixed trade on Thursday, as the Ukraine-Russia conflict continued to weigh on the bloc.

Recently, Ukraine has shown the ability to launch long distance strikes into Russian territory, with Russia countering by launching over 1000 missile strikes at Ukraine’s power infrastructure. With the conflict showing little sign of abating, fears are continuing to grow over further escalation.

This was further compounded by Russian President Vladimir Putin, who stated on Wednesday that the threat of nuclear war was increasing. He also stated that the invasion could become a ‘long-term process’.

The longer the Ukraine-Russia conflict continues, the more of an impact it will continue to have on the Eurozone’s economy and future outlook.

Elsewhere, anticipation ahead of speeches from European Central Bank (ECB) President Christine Lagarde have served to cushion the Euro. Investors are keenly awaiting next week’s ECB policy meeting, and are hopeful for any further hints around monetary policy. Lagarde could push EUR higher if she strikes a hawkish tone.

Pound Euro (GBP/EUR) Exchange Rate Forecast: ECB Policymakers to Boost Euro?

Looking ahead for the Euro, a lack of meaningful economic data means the focus will remain on ECB policymakers.

Andrea Enria and Elizabeth McCaul are scheduled to deliver speeches on Friday. Should they continue to maintain the ECB’s desire to curb inflation and prevent it from becoming embedded, EUR may strengthen as investors become hopeful of higher interest rate hikes. However, should the speeches strike a dovish tone, the Euro may weaken.

Elsewhere, the Ukraine-Russia conflict may continue to weigh on the single currency. With combative rhetoric continuing, and the conflict showing signs of developing in fresh territories as Ukraine seeks to reclaim captured territories, further developments could weigh upon the Euro.

For the Pound, macroeconomic data remains thin on the ground through to the end of the week. As such, domestic headlines may continue to hold swap over market sentiment towards Sterling. If more businesses report the effects of industrial action, GBP could fall as the economic situation continues to darken.

Furthermore, the Pound has become increasingly risk-sensitive over the past months. As such, a shift in risk appetite could boost GBP. However, if markets remain risk-averse, Sterling could continue to weaken.

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