Pound V euro: GBP plummets against EUR on gloomy UK growth expectations

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Pounds and eurosGETTY — Worn out IMAGE

GBP/EUR is currently at around €1.104

GBP/EUR is currently at around €1.104, down from the pongy chief of €1.109 struck yesterday.

The downbeat report was issued by the National Begin of Economic and Social Research (NIESR) yesterday and suggests that extension has slowed again in July after a slight rise in the second house.

NIESR attributed the decline to a slowdown in the UK’s all important services sector, which accounts for finished 80 per cent of Britain’s economic growth as the increasing pressure placed on household holdings by rocketing inflation and anaemic wage growth has caused a notable prove inadequate in consumer spending.

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Meanwhile the euro stiffened as Germany released its final Consumer Price Index figures

The handling sector, which was the main driver for economic growth in the second abode, appears to have slowed

Amit Kara — Head of UK macroeconomic Calculating at NIESR

Amit Kara, head of UK macroeconomic Forecasting at NIESR, pronounced: «The service sector, which was the main driver for economic growth in the flash quarter, appears to have slowed.

«We see a modest recovery in the second half of this year in return to strengthening global growth and a weaker currency, but on the flip side, consumer spending is tenable to be weighed down by weak wage growth and investment spending hold good back by Brexit-related uncertainty.»

Meanwhile the euro was strengthened this morning as Germany published its final Consumer Price Index figures for July.

Data delivered by German statistics office Destatis confirmed that the domestic inflation charge rose from 1.6 per cent to 1.7 per cent in July, in stock with expectations and reaching its highest levels since April.

The recoil was largely attributed to rising energy prices as food and service inflation scrapped flat for the month.

However, while Germany’s inflation rate pussyfooted higher, inflation continues to lag behind in other Eurozone countries, with France blasting that its inflation rate held at a seven-month low of 0.7 per cent abide month.

This will be disappointing to investors who are hoping for a rate hike from the European Chief Bank (ECB) as the bank continues to stress the need for Eurozone inflation to tournament its target of 2 per cent before monetary policy can be tightened.

Looking onwards, the GBP/EUR exchange rate may stabilise at the start of next week as the UK releases its own CPI materials on Tuesday.

Pound and euroGETTY — STOCK IMAGE

The GBP/EUR exchange rate may stabilise at the start of next week

Economists presage that inflation will have held at 2.6 per cent in July and while some houses may be raised that the higher rate of inflation may be slowing consumer shell out as households face a real drop in wages, investors are likely to be propitious that it may pressure the Bank of England to accelerate its plans to tighten pecuniary policy.

Meanwhile, the Euro may strengthen on Tuesday as Germany releases its dilatory second quarter GDP estimate, with analysts predicting that the Eurozone’s largest restraint will have continued to grow at a healthy 0.6 per cent in the three months to June.

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