The GBP EUR exchange was slightly higher on the week but the pound sterling is reeling from a recent sell-off and could see further lows. The pound was looking for support after the recent backtrack on rates from the Bank of England. Sterling did not get much support due to ongoing scandals with the Conservative government and a weaker than expected GDP number. German GDP also came in flat and European countries saw their growth upgraded by the European Commission.
The GBP v EUR was trading around the 1.1670 level heading into the weekend.
UK GDP comes in lower than expected but close to pre-pandemic output
The UK economy is near to recovering its pre-pandemic levels of output, latest figures showed.
Official figures showed the economy growing at 1.3% between July and September. That was lower than expected and well behind the 5.5% spurt enjoyed in the second quarter as the nation bounced out of lockdown.
But the 0.6% growth in September was better than forecast and the UK is now on track to see growth where it was prior to the pandemic at the end of 2019.
The slower pace of recovery over the summer was put down to supply chain issues that have hurt retailers and other businesses including car makers.
Chancellor Rishi Sunak said:
“The economy continues to recover from Covid and thanks to schemes like furlough, the unemployment rate has fallen for eight months in a row, and we’re forecast to have the fastest growth in the G7 this year.”
The pound sterling is still reeling from the recent sell-off driven by the BoE failure to hike rates. The bank’s governor this week reiterated that rates will have to rise but an ex-MPC member, Danny Blanchflower, said the central bank don’t have many clues due to unchartered territory and warner that we should take official projections on inflation with a pinch of salt.
The week ahead will see unemployment figures released for the UK, followed by inflation the following day. The bond market will be interest in both figures and will adjust the pound against recent BoE statements.
Article 16 reignites Brexit drama, EC upgrades euro nation growth
The headwind for the GBP EUR this week is the potential triggering of the Article 16 clause on the Northern Ireland border protocol.
Sources claimed the government would pull the trigger after COP26 and the European Union has vowed to retaliate with strong countermeasures. That could see wild price swings in the pound sterling after a recovery from the Brexit
However, the group lowered its outlook for next year, warning that high energy prices would hit utility bills and household spending. The economy also faces other obstacles in the supply chain.
“The European economy is moving from recovery to expansion but is now facing some headwinds,” says European Economy Commissioner Paolo Gentiloni.”
The GBP v EUR has key support near 1.500 if the recent sell-off intensifies.