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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.