The GBP EUR exchange rate was 0.10% higher on Tuesday as Europe faced a slew of economic data that had mixed results. A shrinking French economy also saw an uptick in inflation, but the German unemployment picture improved to help the euro.
The GBP to EUR was trading near the 1.1750 level and trying to regain strength.
French economy contracts in first quarter, German employment weaker
France’s economy slowed over the first quarter due to the impact of soaring inflation, increasing the risk for President Emmanuel Macron in key legislative elections in only two weeks’ time.
According to the latest figures released by the French statistics office INSEE, the French economy shrank by 0.2 percent from the previous quarter, which was a big slump compared to last year’s strong 6.8 percent recovery as the pandemic measures ended.
Russia’s invasion of Ukraine has hurt growth across Europe, fuelling inflationary pressures that have gouged consumers and forced them to rein in their spending.
Household spending in France dropped 1.9 percent in the first quarter of 2022, and price increases have only gotten worse, with inflation seen hitting 5.2 percent in May, according to Tuesday’s data.
The French economy has never seen 5% inflation since the mid-1980s and could hurt Macron’s efforts to secure a majority for his Renaissance party in parliamentary elections 12 June.
There was better news for the euro after German unemployment improved in May. Labour Office figures showed that trade and services benefited from the end of pandemic restrictions, despite the Ukraine conflict and supply bottlenecks.
The Federal Labour Office said unemployment fell by 4,000 to 2.285 million after analysts had expected a decrease of 15,000.
“Employment continues to grow and the demand for new workers continues to move at a very high level,” said the head of the labour office, Detlef Scheele.
Another letter of no confidence lands for Boris Johnson
Another Conservative MP has submitted a letter of no confidence in Boris Johnson as the number now grows to 28 seeking his resignation.
John Stevenson, MP for Carlisle, said he was “deeply disappointed” in the rule-breaking parties at Downing St and in Mr Johnson’s response to parliament.
He added that he wants a vote to “draw a line” under the issue, but with Johnson remaining has “taken the appropriate action” to force a vote.
“The continuing criticism, revelations and questions are debilitating for the government at a time when there are so many other important and critical issues to be addressed,” he added.
The pound sterling is being weighed by the allegations and uncertainty over the country’s leadership and 54 letters are needed to force a no confidence vote.
Rising interest rates are hitting the UK with mortgage approvals falling to June 2020 levels. That was accompanied by the highest credit card borrowing figures since 2005 as consumers start to feel the pinch.
The latest figures will sound alarm bells as the situation for discretionary spending will likely only worsen in the months ahead as short-term credit runs dry.
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