GBP v EUR at its lowest point since Feb 2021
Today sees another mini-sell off in the Pound on the eve of the Queen's funeral. The strong resistance barrier of £-€1.15 has been broken, after UK retail sales figures fell by a horrible 1.6% in August. Rising prices and the harsh cost of living crisis, meant that consumers reduced spending (bad news for the UK economy as we are a services nation). All main sectors within the UK fell in activity for the first time since July 2021.
We are now seeing GBP v USD at the lowest level since 1985 and the consensus both short and long term, sees the pair going lower still. Not helping the Pound today are another two headwinds. First up, wholesale gas prices are stabilizing and look to be past their bottom-out level. In fact, there is a suggestion that natural gas will halve in price over the winter (good news for the EU & €).
Secondly, comments from the ECB this morning point towards an aggressive stance on interest rates is here to stay. An unprecedented 75bp hike last time out, is likely to happen again this time round. Comments from ECB President Lagarde such as this, 'we are still so far away from the interest rate level that is necessary to bring inflation down' shows a real purpose. Compare that with the reluctant BoE and you can see why traders are nervous about next week's meet.