EUR GBP Range Persists with Employment Next
The EUR GBP exchange rate was caught in a trading range between the 0.8400-0.8600 levels. The UK economy saw GDP slowing on Friday and will have employment released tomorrow. The government looks set to pass the plan B restrictions and likely put paid to an interest rate hike.
The EUR v GBP opens the week near 0.8530 ahead of the latest economic data.
UK economy slows in October ahead of new restrictions
The UK economy slowed to a crawl in October, adding to fears over the recovery from the previous lockdowns.
New data from the Office for National Statistics (ONS) on Friday saw GDP growing by only 0.1% in the month, below the 0.4% that economists had forecast.
The economy stayed below the pre-pandemic level of 0.5% in February 2020, and the data hints that the UK economy was struggling before the discovery of the Omicron variant.
Output in consumer-facing services was 0.3% higher largely due to an 8.1% increase in wholesale and retail trade and repair of motor vehicles, however, output at restaurants and hotels dropped by 5.5%.
“Growth disappointed in October, reinforcing concerns about the resilience of the UK’s economic recovery to the Omicron variant and the impact of further restrictions,” Alpesh Paleja of the CBI said.
“We need to create consistency in our approach and build confidence by reducing the oscillation between normal life and restrictions as we learn to live with the virus and its variants.”
“Meanwhile, supply pressures remain acute and further rises in inflation are looming. We expect growth to build further momentum ahead, but more action is needed to address longer-term challenges, including “scarring” from COVID and poor productivity.”
The government looks set to vote for the Plan B restrictions tomorrow despite a revolt from Tory party members. Keir Starmer has said his party will vote for them, which led to Tory Steve Baker calling the party “opposition in name only”.
BoE expected to hike in Q1 2022, says Reuters poll
The Bank of England was expected to wait until Q1 of 2022 to hike rates and that was before Friday’s GDP numbers. This week’s employment and inflation figures are unlikely to change the course of the government’s plans.
Chancellor Rishi Sunak said of GDP: “We’ve always acknowledged there could be bumps on our road to recovery, but the early actions we have taken, our ongoing £400bn economic support package and our vaccine programme mean we are well placed to keep our economy on track.”
However, businesses are saying that the new Plan B restrictions will mean a further hit for growth and jobs unless the Treasury provides more support.
That will only add to the government’s debt pile and if the same restrictions continue to be applied to every variant, then the government may find there is no way out of that debt trap.
Government borrowing costs have risen despite rates being anchored at near zero so investors should not expect a rapid rise in rates.
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The post EUR GBP Range Persists with Employment Next appeared first on Euro Rate Forecast.
Source: https://www.eurorateforecast.com/2021/12/eur-gbp-range-persists-with-employment-next/
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