EUR GBP Nears the Yearly Lows as European Gas Surges

The EUR GBP exchange rate was 0.20% lower on Tuesday after gas prices surged in the Dutch gas futures market by 18%. The move to record highs risks further problems in the European market after Italy and Spain already took previous action to support troubled firms. The pound was weighed by car sales at their lowest September since 1998.

The EUR to GBP rate trades at 0.8520 with the yearly lows at the 0.8450 level.

Dutch wholesale gas prices reach a record high

Dutch wholesale gas prices broke through the 100 euro level for the first time on Tuesday amid wider energy market price increases. The market is being hit by supply concerns, colder weather forecasts and a drop in French nuclear generation due to a strike.

The November gas price at the Dutch TTF hub broke the 100 euro level, a new record high. The contract was 16.25 euros higher at 111.25 euros per megawatt hour.

The December contract was also above 100 euros, trading 15.77 euros higher at 110.99 euros/MWh.

The market ignored news that Nord Stream 2 has started filling one of its two pipelines with natural gas for tests, according to the operator on Monday.

Germany’s energy regulator has also asked Swiss-based Nord Stream 2 AG to provide assurances that the pipeline meets regulatory requirements when it enters service, adding it cannot be ruled out that operations could start soon.

UK firms hike prices at fastest pace, car sales slump

The rapid increase in fuel prices, energy and staff costs were being passed on to customers in September, with the ‘rate of prices charged inflation’ accelerating to the highest level since the data began in July 1996.

Tim Moore, economist at IHS Markit, says companies are passing their rising costs onto consumers:

“The supply chain crisis put a considerable brake on recovery in the UK service sector during September. Survey respondents widely noted that shortages of staff, raw materials and transport had resulted in lost business opportunities. Consequently, new orders expanded at the slowest pace since the end of the winter lockdown, while backlogs of work accumulated as service providers struggled to find candidates to fill vacancies.”

UK car registrations plummeted 34% in September for their weakest September since 1998, but they may not recover until next March, according to Sean Kemple, Managing Director of Close Brothers Motor Finance.

“The supply chain pressures are unlikely to ease up this side of Christmas and with second-hand vehicles going for premium prices, customers looking for a car are left in an unenviable position. Realistically, it could be March next year before we see any real recovery.”

“The ongoing chip shortage, compounded by rocketing manufacturing costs, continues to present challenges for dealers, manufacturers and consumers,” he added.

The euro versus the pound sterling has ECB meeting minutes to consider on Thursday but the gas price moves will control the exchange rate before then.

The post EUR GBP Nears the Yearly Lows as European Gas Surges appeared first on Euro Rate Forecast.