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On April 23, Berenberg Bank stated that the war with Iran is exacerbating inflationary pressures in the Eurozone, and the European Central Bank (ECB) is closely monitoring the situation. PMI data shows that input costs and output prices both rose at their highest levels in over three years in April. The extent to which these costs are passed on to consumers varies, with Germany experiencing a more pronounced effect than France. At next weeks meeting, the ECB is likely to keep its key interest rate unchanged. However, if the conflict escalates further, causing high input costs to be directly or indirectly passed on to consumer prices, the pressure on the ECB to raise interest rates will increase.According to LESG data, European companies are expected to report first-quarter earnings growth of 3.2%, higher than the 2.8% growth forecast a week ago. European companies expect first-quarter revenue growth of 0.4%, unchanged from the forecast a week ago.A Reuters poll found that 50 out of 85 economists expect the European Central Bank to raise interest rates at least once in 2026 (compared to 21 out of 60 economists in a March poll).A Reuters poll showed that 44 out of 85 economists expect the European Central Bank to raise its deposit rate to 2.25% in June (in a March poll, 38 out of 60 economists believed there would be no rate adjustment in 2026).A Reuters poll found that 84 out of 85 economists believe the European Central Bank will keep its deposit rate unchanged at 2.00% in April.

0.8450 is being reached by EUR/GBP as the prospect of a UK recession looms

Daniel Rogers

Aug 05, 2022 14:46

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Following a huge upward rise from 0.8360 on Thursday, the EUR/GBP pair has subsequently turned sideways around 0.8430 in the Tokyo session. After the Bank of England (BOE) hiked interest rates by 50 basis points, the cross displayed a significant upward rise (bps) (bps). The BOE lifted interest rates by 50 basis points in succession, bringing them to 1.75 percent.

 

The investing community is aware that UK household earnings have been unsteady during the preceding few months. In addition, the economy's inflation rate is fast expanding. The inflation rate was 9.4 percent prior. The recent statement by BOE Governor Andrew Bailey that price increases might exceed 13 percent has sent shockwaves across the market.

 

The runaway inflation is now escalating, leaving the BOE with very little flexibility to tighten its monetary policy. The BOE is in poor shape as a result of the dismal economic data and the continuing political upheaval following the departure of UK Prime Minister Boris Johnson. A recession in the UK economy is extremely probable in the case that the inflation rate is close to 13 percent.

 

German manufacturing order numbers for the Eurozone have decreased by 0.4 percent against an anticipated 0.8 percent decline and a prior monthly contraction of 0.2 percent. Falling orders from factories indicate sluggish demand in Germany as a whole. It is vital to remember that Germany is a key element of the European Union (EU), and that economic data from Germany has a huge effect on people who favor the common currency.


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