Pound-to-Euro Recovers as Eurozone Energy Risks Return

– Written by


David Woodsmith

STORY LINK Pound-to-Euro Recovers as Eurozone Energy Risks Return

The Pound to Euro (GBP/EUR) exchange rate recovered some ground on Thursday, following the losses seen in the previous session.

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1673, up roughly 0.2% from Thursday’s opening levels.

The Euro (EUR) came under pressure on Thursday as another rise in energy prices fuelled concerns about the effect of higher costs on businesses across the Eurozone.

With winter approaching, attention is increasingly turning towards the region’s ability to replenish its gas reserves, particularly while ongoing disruption to energy supplies from the Middle East continues to push European gas prices higher.

European natural gas prices have risen sharply in recent weeks, while storage facilities remain significantly less full than they were at the same stage last year.

Although the European Commission maintains that there is currently no immediate risk to supplies, thinner reserves leave the bloc more exposed to a renewed surge in demand or further disruption during the winter months.

The prospect of persistently elevated energy costs is particularly troubling for energy-intensive industries, where higher gas and electricity prices can erode margins, delay investment and weigh on industrial activity.

The Pound (GBP) struggled to make much progress against its major counterparts on Thursday, with a temporary lull in the UK economic calendar leaving Sterling without a clear catalyst.

GBP investors have so far been left with a mixed picture by this week’s economic data.

While inflation has remained elevated, signs of a softer labour market have provided a counterweight, leaving expectations over whether the Bank of England (BoE) will raise interest rates again before the end of the year broadly unchanged.

Near-Term GBP/EUR Forecast: UK Retail Sales and PMI Data in Focus

Looking ahead to Friday, the Pound to Euro exchange rate could face increased volatility as the latest UK retail sales and PMI figures are released.

The session will begin with July’s retail sales figures, with forecasts for a decline in consumer spending potentially weighing on Sterling.

Attention will then shift to August’s preliminary PMI readings, where an expected slowdown in services sector growth could provide another headwind for the Pound.

Meanwhile, the Eurozone will also publish its flash PMI figures on Friday. A deterioration in private sector activity across the bloc could undermine the Euro and provide GBP/EUR with some additional upside.

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