GBP EUR Lower Despite Weaker Euro Data 

The GBP EUR exchange rate was -0.28% lower on Tuesday despite weaker numbers from the European ZEW economic surveys. The move in the pound sterling is a pullback from last week’s strong rally. The UK’s new Chancellor Nadhim Zahawi was under fire from the BoE Governor over tax-cut messaging. 

The GBP to EUR trades at 1.805 with German inflation and UK GDP ahead on Wednesday. 

Bank of England aims Chancellor for messages

The Bank of England Governor Andrew Bailey criticised Chancellor Nadim Zahawi for his tax cuts promises.  

Bailey said those things should only be displayed when the chancellor sets a budget. His comments are also likely that Zahawi may not even be chancellor for long and is using the situation as leverage for a leadership bid. 

However, Zahawi said he was setting up his stall as prime minister. Not only did he say that he fully costed the pledges, he also added that there would be more detail about how the pledges will be paid shortly. 

Zahawi promised an income tax cut of 2p over the next two years, and Bailey was asked to comment.  

Labour’s Angela Eagle also made comments about the Zahawi statement. Eagle asserted that typically financial policy and fiscal policy is factored in budgets. She added that she cared less about the other Conservatives running, focusing on Zahawi, whose promises “can move markets” and “cause problems”.  

Bailey replied, stating that he didn’t “ think things that should be done in budgets can ultimately be done outside budgets”. However, he added there were various views on this matter. 

Former Chancellor Rishi Sunak accused his Tory leadership competitors of being dishonest and offering the public “fairytales” with tax cut promises due to the country’s fiscal situation. 

ZEW survey takes a nosedive in Europe and Germany 

ZEW economic sentiment dropped below its previous pandemic lows, according to data from the EW economic research institute. 

The European number fell to -53.8 from minus 28 and well below the prediction of 41. 

Achim Wambach, president of the ZEW institute said that concerns about the energy supply in Germany, the ECB’s interest rate hike announcement and further pandemic-related restrictions in China all contributed “to a considerable deterioration in the economic outlook.”  

Experts also see the current economic situation more negatively than in the previous month. The six-month outlook is gloomy with talk of recession and a euro near parity with the US dollar for the first time since the early days of the single currency. 

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