GBP EUR Awaits PMI British and European PMI Data

GBP EUR Higher Ahead of PMI Business Activity

The GBP EUR exchange rate was flat on Tuesday and now awaits PMI data for the British and Eurozone economies. The pound was pressured on Monday with the surge in energy prices. That was helped by news that Norway was increasing production to Europe starting on October 1st.

The GBP to EUR trades at 1.1650 and will look to PMI data today and the Bank of England rate meeting on Thursday.

UK public borrowing dips less than expected as debt costs rise

British public borrowing was lower by less than expected in August, according to government figures on Tuesday, highlighting the ongoing costs of the pandemic and a rise in debt interest payments due to rising inflation.

Public sector net borrowing, excluding state-controlled banks, fell to 20.5 billion pounds in August, down 21% from August a year earlier, but well above economists’ 15.6 billion pound forecasts. British government borrowing soared last year because of the coronavirus, hitting its highest level since World War Two at 15.5% of gross domestic product. Chancellor Rishi Sunak will unveil new budget and growth forecasts on October 27, as well as new multi-year spending plans and longer-term fiscal goals.

Spending has fallen sharply in the current financial year, due largely to the drop in the number of people receiving job furlough payments as the economy reopened.

Higher interest payments on inflation-linked government bonds were another factor in pushing up debt servicing costs in August and were likely to increase as inflation continues to pressure the economy.

Europe also at risk from skyrocketing gas prices

Surging energy prices in Europe are hurting companies as much as consumers with price spikes starting to affect industrial activities, which is another threat to the recovery.

Large European firms, from chemicals and mining to the food sector, say higher gas and electricity prices are hitting their profit margins and forcing some to halt operations. Some factories have shut down because of record natural gas prices and further idling of industrial activity across Europe is likely in the coming weeks, analysts say.

Meanwhile, record European natural gas prices are pushing Asian spot prices of liquefied natural gas (LNG) to record levels for this time of the year, which marks the transition from peak summer demand to the winter heating season.

Norway has approved a production increase at state-owned energy company Equinor to increase gas exports from the Oseberg and Troll fields to supply the tight European supply.

Europe’s economy was boosted by the latest OECD forecasts after they lowered the growth outlook for the United States and global economy but raised the eurozone forecast by 1% for 2021.

The forecast saw the outlook varied within the single-currency bloc, with higher growth expected in France, Italy and Spain while Germany was not performing well. That will come under further pressure due to the gas price surge and today’s flash PMI readings will shine more light on the German economy.