GBP EUR Exchange Rate: Weekly Review June 25th   

GBP AUD Moves Higher with a UK GDP Boost 

The GBP EUR exchange rate started the week around the 1.1650 level after a bounce from lower levels followed the BoE rate meeting. Markets waited for Wednesday’s inflation numbers but they came in as expected and failed to spark the pound sterling. The UK experienced the largest rail strike in thirty years. There were threats of another coming from the post office. Europe has its own problems to deal with in the energy market. There is no real trend developing in the pair. 

The GBP v EUR will look to build on the recent support for a push higher to 1.1800. 

Inflation comes in at expectations, but still a 40-yr high 

The pound sterling stood, awaiting Wednesday’s inflation figures from the UK which came in at analysts’ expectations. Trades decided not to push the pound sterling higher due to pricing expectations for rate rises. However, the latest figures were still a forty-year high at 9.1%. They drove the current rail strike, one that ground the network to a halt in its first days. Worryingly for the UK, postal workers are considering a similar strike. This is maybe just the start of industrial tension if inflation hits the BoE target of 11%. Central banks predicted big drops in inflation in 2023. If they are wrong, workers and unions will continue pressuring them for wage rises. 

Investment bank Citi warned that UK food price inflation will hit 20% in the first quarter of 2023- further signs that it is not just energy driving the increase. 

“Food inflation overshot our forecasts. We now expect price growth here to peak at a little over 20% in Q1 2023, with producer price inflation here continuing to accelerate,” Citi economist Benjamin Nabarro said in a research piece. 

Russian boycott means mild European recession, says Rabobank 

Economic research from Rabobank stated that the latest Russian energy embargo will tip Europe into a mild recession.  

The sixth set of sanctions still needs to be signed off but imports of Russian crude oil via sea will be halted by the end of the year. An exclusion for pipeline oil is planned for Hungary and the Czech Republic due to energy security concerns. The curtain is coming down on Russian oil to the EU. To make matters worse for the EU, it also saw less gas from Russia due to maintenance issues. This led to The Netherlands joining Germany in lifting production caps on coal-fired plants. The move will see coal increased into 2024 in a bid to alleviate a potential winter energy crisis in Europe. 

“We expect the Eurozone to enter a recession at the end of this year. Combined with carry-over effects from the strong second half of 2021 this means that the economy is still set to grow in 2022, yet to contract in 2023. We have pencilled in growth of 2.2% in 2022 and -0.1% in 2023,” Rabobank said. 

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