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EUR/GBP Reaches a new Crossroad
05.07.2022

The EUR/GBP has strongly increased in value since March 2022. The price of the exchange has increased by 4.5% since March of this year but has now reached a significant level. The price has increased to the range where the price struggled to cross in 2021 for 9 full months.

The price of the EUR/GBP over the past 24 hours has been mainly uncertain with very little volatility and volume. Overall the price saw a very slight decline but has since slightly corrected upwards. The market currently is neither confident in the GBP nor the EUR as both regions have expressed a high risk of a recession and also due to the political situation.

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Yesterday the Eurozone released multiple economic statistics and is also scheduled to release further economic releases over the coming days. The PPI for May reported a slightly lower growth rate, but has not yet indicated contraction or close to it. The value fell to 0.7% for May from 37.2 to 36.3 points for the past 12 months.

Germany continues to disappoint in terms of economic statistics with the foreign trade statistics for May disappointing investors with exports decreasing by 0.5% instead of the expected growth of 0.9%. In addition to this imports rose by 2.7% instead of the forecasted 0.9%, as a result of which the trade balance became deficit and amounted to –1.0 Billion Euros and without doubt can also affect the country’s Gross Domestic Product. Germany also released one of its well-known and followed confidence indexes which indicated that confidence within the market is well below what was originally believed.

The picture for Europe may sound bleak other than the indications of rate hikes but the picture in the UK is not looking all that different. The UK market is waiting for today’s release of the minutes of the last meeting of the Bank of England. Traders are eager to see if the report contains any indications of a further rate hike by the regulator or any other alterations to the monetary policy.

In addition to the above, the British Chamber of Commerce reported yesterday that national companies are becoming increasingly negative about the economic outlook for the coming months. This is mainly due to the rise in inflation, difficulty in getting loans and declines in investments. Over 5,700 companies took part in the survey between May and June, and only 54% expected better performance over the next year. Previously, 63% of companies counted on this. What is also worrying regulators is that over 65% of companies that took part in the survey advised they plan to raise prices for products and services in the next 2-4 months. This puts pressure on the Bank of England as to whether to tackle inflation or the risk of a recession.

In terms of the price movement, it seems that traders are waiting for further drivers in the market. Today the market will be eager to see the many economic releases due from both the UK and EU but mainly investors will be closely following the speech of the Bank of England Governor.

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