EUR GBP Stumbles Ahead of Quiet Data Week

The EUR GBP exchange rate was lower on Thursday and Friday after UK GDP came in higher than expected in the final revision. German and European inflation also came in at the higher end of expectations. The week ahead is quiet for economic data, and we may see news headlines being more of a driver, while the GDP performance will support the pound sterling.

The EUR to GBP rate trades back below the 0.8600 level again after a recent rally faded.

Boris Johnson seeks ‘bold decisions’ for post-virus economy

British Prime Minister Boris Johnson said he was ready to make “bold decisions” to rebuild the economy after the coronavirus pandemic as his Conservative Party met on Sunday for its first conference since 2019.

The Tory conference opened on Sunday in Manchester as the country reels from a shortage of truck drivers to deliver fuel. Britain continues to see empty pumps and long queues at petrol stations.

Concerns about labour shortages are meeting fears of higher taxation, rising energy bills and a cut in welfare payments.

Before the Tory conference, Johnson said he was ready to take the “big, bold decisions on the priorities people care about — like on social care, on supporting jobs, on climate change, tackling crime and levelling up.”

Asked about the truck driver shortage crisis, Johnson said it was a “chronic problem” associated with a reliance on migrant workers willing to work for lower wages and poor conditions. He said he wouldn’t repeat the old mistakes.

“The way forward for our country is not to just pull the big lever marked uncontrolled immigration, and allow in huge numbers of people to do work,” Johnson said.

Business owner confidence plummets from summer peak

Business owners’ confidence was said to have fallen off a cliff last week in a survey by the Institute of Directors (IoD). The group said:

“Following a period of optimism in the early summer, people running small and medium-sized businesses across the UK are now far less certain about the overall economic situation, and the IoD Directors’ Economic Confidence Index fell off a cliff in September. A higher proportion of our members expect costs to rise in the next year than expect revenues to rise.”

“This is not helped by the government’s recent decision to raise employers’ national insurance contributions, which acts as a disincentive to hire just when the furlough scheme is ending.”

A boost for the pound sterling is that issues with getting fuel were “virtually at an end” in Scotland, the North and the Midlands, where only 6% of filling stations were now said to be empty.

The only high-level data release this week for the EUR v GBP is the minutes of the ECB monetary policy meeting on Thursday.

However, ECB Chief Christine Lagarde said last week that the European Central Bank should keep monetary policy loose and not overreact to temporary price spikes in order to ensure inflation returns to its target.

“The key challenge is to ensure that we do not overreact to transitory supply shocks that have no bearing on the medium term, while also nurturing the positive demand forces that could durably lift inflation towards our 2 percent inflation target,” she said.

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