- The British pound (GBP) falls on fears of recession
- UK public sector net borrowing rose to 3rd highest year
- The euro (EUR) appreciated against the pound but not against the US dollar
- German consumer confidence and the ECB Christine Lagarde speaks out
The Pound Euro (GBP/EUR) exchange rate is trading under pressure, ending a six-day losing streak. The pair settled -0.50% lower on Tuesday at €1.1832 towards the low of the day, after trading in a range between €1.1810 and €1.1916. As of 05:45 UTC, GBP/EUR is trading +0.05% at €1.1897.
The pound fell again on Tuesday as investors worried about the cost of the life crisis gripping the UK. Rising energy and food prices amid the fallout from Russia’s war are squeezing household incomes.
However, the weakening growth outlook for the UK means that investors are also reducing their expectations of rate hikes by the BoE, fearing that a too rapid increase in interest rates by the central bank could tip the British economy in recession.
On the UK data front, public sector net borrowing hit its third highest year on record in the financial year ending March 2022. The UK government borrowed £151.8 billion sterling, which, excluding the banking sector, represented 6.4% of GDP.
Today, no high impact UK economic data is due out today, leaving the Pound to trade on sentiment and/or led by the Euro.
The euro appreciated against the pound, but fell against the strengthening of the US dollar. The euro is struggling to make any real gains as investors fear the EU may soon announce the sixth round of sanctions against Russia. Reports are circulating that this package could include smart sanctions on Russian oil exports.
Looking ahead, German consumer confidence data should show sentiment will deteriorate further in May, falling to -16.3 from 15.5 as inflation remains high.
European Central Bank Governor Christine Lagarde is also due to speak tomorrow amid growing hawkish calls from within the central bank. The ECB is expected to raise interest rates in the third quarter, with some policymakers suggesting July could be the launch date.