Euro pound exchange rate (GBP / EUR) climbs as fuel problems ease

September 30, 2021 – Written by John Cameron

GBP / EUR regains ground as fuel supplies stabilize

The Euro pound exchange rate (GBP / EUR) strengthened this morning as the UK fuel supply crisis is once again under control and the UK releases positive data.

Meanwhile, German employment data has been printed below forecast, which could hurt euro exchange rates.

British pound (GBP) rallies as fuel crisis eases

Simon Clarke, Chief Treasury Secretary, told Sky News this morning that the UK fuel supply crisis is easing. Clarke said:

“We are now in a situation where more fuel is being delivered than it is sold, so this crisis is now absolutely something that is back under control.”

Clarke also revealed, in an interview with the BBC’s Today program, that the military is ready to be deployed to address remaining shortages:

“The military is on standby to help support commercial operations, and of course we’ve seen some changes, including allowing some of the Department of Defense driving instructors to help increase tanker numbers…

“There are 150 drivers on standby to help support operations as needed.

“This is designed to help strengthen the business operation which reduces the pressures we have seen on the forecourt.”

In addition, the UK GDP growth rate and business investment data for the second quarter of this year have both been revised upwards. GDP growth was 5.5%, against 4.8%, while business investment was 4.5%, against 2.4%.

The revised data shows that the UK economy recovered faster than previously thought during the April to July period.

However, the pound’s gains could be limited by fears that the UK supply chain crisis will continue to worsen, leading to more shortages and higher prices during the Christmas season.

Such an event could potentially harm the UK economy by reducing consumer spending during the holiday season, when economic activity is generally high.

Euro (EUR) dented by German data and ECB Dovishness

The euro (EUR) slipped against the pound today after German employment data this morning fell short of economists’ expectations.

German unemployment fell by 30,000 in September, against expectations of a decline of 33,000, while the unemployment rate remained at 5.5%, although it is expected to fall to 5.4 %.

While the results were only slightly lower than expected, disappointment seems to have rocked the euro.

Meanwhile, the single currency also appears to be under pressure by the European Central Bank‘s (ECB) ‘s dovish approach to monetary policy, particularly with regard to the difference with the Federal Reserve and the Bank of England. (BoE).

While the Fed and BoE are expected to raise interest rates next year to combat overheating inflation, the ECB is unlikely to hike rates until 2024.

ECB President Christine Lagarde has remained steadfast in her belief that the current spike in inflation in Europe is due to weak base effects and temporary factors.

However, many economists are increasingly worried about the prospect of stagflation, as inflationary pressures continue to intensify while there are signs of an economic slowdown.

The accommodating approach of the ECB and fears of a monetary policy misstep weigh on the euro today.

GBP / EUR exchange rate forecast: can the pound keep rising?

Looking ahead, it is not clear whether the GBP / EUR will be able to maintain its bullish path. As the fuel situation in the UK continues to improve, the appeal of the pound may also pick up. However, there are also deeper supply chain issues plaguing the UK economy. Any further development could cause the pound to fall further.

As for the euro, Germany’s latest inflation rate this afternoon could trigger some movement. While rising inflation has tended to boost the currency this year as it indicates a strong economic recovery and increases the likelihood of a tightening of monetary policy, things could take a different turn.

With the ECB seemingly attached to its loose approach to policy, and with rising inflation now looking more like a curse than a godsend, Germany’s numbers could weigh on the euro. German inflation is expected to rise from 3.9% to 4.2%, a new 28-year high.

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