The GBP to EUR exchange rate lost some ground in the week but recovered towards the weekend. At the outset, fears grew over the energy crisis as wholesale gas prices hit another record high. This forced another three firms to stop trading. The week also began with panic buyers descending on UK forecourts and seeing a large number of retailers without fuel.
The GBP v EUR was trading back near 1.16500 on Friday after the final Q2 reading for UK GDP came in ahead of expectations.
Gas price rollercoaster hurts the pound sterling
The UK natural gas price rollercoaster continued on Thursday as prices saw another record at 238p per therm.
Gas prices are soaring across Europe as well, as stockpiles of gas, coal and water for electricity production are scarce.
“We didn’t predict these prices coming,” Alex Grant, senior vice president at Equinor said. “In the prices there is a risk premium for what might happen going forward and the risk is still very much dependent on gas supply.”
Meanwhile, the regulator Ofgem has asked insolvency experts from Teneo to be ready for a rescue plan in case one of the major suppliers goes bust, according to Sky News.
That sent shivers through the market over fears that one of the main suppliers is feeling the squeeze. Normally, energy regulator would choose a new supplier to ensure that customers can keep an interrupted supply.
The process is known as ‘Supplier of Last Resort’ and if it doesn’t work, Ofgem asks the government for an ‘Energy Supply Company Administration Order’.
The petrol shortages appear to be easing as customers were reassured of ample supplies.
UK second quarter GDP rebound stronger than first thought
The rebound in the UK economy was shown to be faster than first forecast in the second quarter as spending surged after lockdowns were lifted, according to official figures.
The ONS reported that GDP was 3.3% below where it was in the final quarter of 2019 before the pandemic struck, against the 4.4% previously estimated.
The largest driver of the upward GDP revision was in household spending, where it added four percentage points of the 5.5% increase as restrictions were eased to allow outdoor dining in April, with further restrictions lifted in May.
In Germany, unemployment dropped again in September, according to official figures on Thursday. The Labour Office said that the number of people out of work had fallen by 30,000 to 2.5 million. Despite this, the jobless rate in the country remains remained unchanged at the 5.5% level.
There was also further pressure for the economy with German consumer prices rising at the fastest pace in nearly three decades. Inflation jumped to 4.1% in September, according to the Federal Statistics Office. Energy alone was 14% higher than the same period last year.
Europe’s largest economies are all struggling with higher prices with inflation rates higher than the 2% target set by the European Central Bank.