British pound eased amid concerns over energy supply
GBP / EUR exchange rate muted amid looming energy crisis
The Euro pound exchange rate (GBP / EUR) has been muted so far today amid the energy crisis in Europe. Despite a slight cooling in gas prices during yesterday’s session, the pound is now grappling with fears over UK economic growth.
GBP / EUR continues to hold this week’s gains above € 1.17, although it remained moderate today, trading at 1.1748 at the time of writing.
British Pound (GBP) exchange rates fight UK economic concerns
After strengthening in the first part of this week, the sterling bullish trend is slowing down and starting to struggle to hold onto gains.
Rising gas prices to a new high on Wednesday put pressure on sterling exchange rates as fears grew over the impact on consumers and businesses, and the potential impact on economic growth from the United Kingdom.
The growing energy crisis has led to warnings from some industries of shutdowns due to soaring costs as winter approaches.
Dr Richard Leese, Chairman of the Energy Heavy Users Group, said:
“We have already seen the impact of truly astronomical increases in energy costs on production in the fertilizer and steel sectors.
“No one wants to see a repeat in other industries this winter given that the British IIAs [energy intensive industries] produce so many essential domestic and industrial products and are intrinsically linked to many supply chains.
“The question is not only whether gas and electricity supply will be available, but also price. Energy intensive industries could simply be excluded from the market.
“This danger is greatly increased given the global energy outlook this winter and the competition from Europe and other parts of the world for gas, including LNG.”
Additional pressure on the pound also came from the Conservative Party conference speech by British Prime Minister Boris Johnson.
Some economists and business leaders have been alarmed by Johnson’s stance on supply chain issues, staff shortages and inflation, with the UK Prime Minister appearing unresponsive to recent fuel shortages.
Euro (EUR) exchange rates are constrained as gas price slowly increases
The euro is in a range so far in Thursday’s session after rising from lows in yesterday’s session.
Soaring gas prices also weighed on euro exchange rates, but after Russian leader Vladimir Putin suggested increasing gas supplies to Europe, the single currency was able to make modest gains .
“Think about the potential increase in supply in the market, only we have to do it with caution. “
Following comments from the Russian president, gas prices stabilized in the optimism of avoiding a major energy crisis, supporting euro exchange rates.
However, German industrial data released this morning looks set to limit the euro. Industrial production contracted -4% in August, much worse than the -0.4% forecast, as supply chain problems disrupted output in the eurozone’s economic powerhouse.
Elsewhere, a slight improvement in market sentiment helped support the euro’s exchange rates due to its negative correlation with the US dollar, which weakened due to weaker demand for safe-haven securities.
Euro pound forecasts: will energy concerns continue to weigh on the pound sterling?
Ongoing energy price developments are likely to continue to fuel the euro exchange rate movement in the near term.
Persistent uncertainty combined with supply chain issues, staff shortages and growing inflationary pressure are fueling stagflation fears in the UK economy, potentially fueling volatility in the pound sterling.
UK employment data released early next week could lead to more GBP / EUR movement as data on unemployment and wage growth will provide insight into the health of the UK labor market and personnel issues.
Meanwhile, German trade data for August released tomorrow morning will shed light on the situation for Europe’s largest economy, especially after worse-than-expected German industrial and industrial production data.
Further German data due to be released early next week could also weigh on euro sentiment, with German ZEW economic surveys expected to decline for a fifth consecutive month.