The GBP EUR exchange rate was 0.30% higher on Tuesday as recent problems in the energy market and supply chain ease up. Customers of energy suppliers are set to be moved to Eon, taking some uncertainty off the table. However, data showed companies hiking prices and car sales were sharply lower.
The GBP to EUR trades near 1.1750 and will attempt to get above the 1.1800 yearly highs again.
Eon to take up 200k abandoned energy customers
The energy regulator Ofgem announced that the energy company on will take on 230,000 customers who were affected by the recent collapse in three firms.
The latest update not only removes some uncertainty over customers, but it also removes doubts over the health of the larger firms. The big energy suppliers hedge their prices in the capital markets, and this buffered them from the huge increase in prices.
Traders had been on edge recently with the surge in wholesale gas prices and reports that Ofgem were even getting advice for the larger firms with contagion fears. There are still fears over the gas market after Dutch futures prices jumped 18% on Tuesday and that is helping to spur the pound versus the euro.
Panic buying of fuel had been another headache but that has normalized with only parts of the South-East of England still seeing issues.
Despite the calm, there are still underlying problems with the supply chain, but these will likely have knock-on effects for the euro also.
UK car sales tumble in weak September, companies hike prices
UK companies hiked their prices at the fastest rate on record last month, as the energy crisis and staff shortages hit the economy and push up inflation, according to IHS Markit.
Tim Moore, economist at IHS Markit, said companies are passing their rising costs onto consumers:
“The supply chain crisis put a considerable brake on recovery in the UK service sector during September. Survey respondents widely noted that shortages of staff, raw materials and transport had resulted in lost business opportunities. Consequently, new orders expanded at the slowest pace since the end of the winter lockdown, while backlogs of work accumulated as service providers struggled to find candidates to fill vacancies.”
“Another spike in operating expenses was reported in September, even though this data is yet to fully reflect the inflationary impact of the UK fuel crisis and surging energy prices at the end of the month. Higher wages were also a key reason for increased cost burdens in September,” he added.
In other data, the UK car market has recorded its weakest September since 1998, despite record sales of battery-powered electric cars. New car registrations plunged by over 34% compared with September 2020 to 215,312, which is the weakest September since 1998.
The GBP v EUR is moving higher based on the expectations for a faster rate hike from the BoE with some analysts looking to November for the first move by the bank.