Sep 21, 2022 14:49
The Euro to Pound exchange rate has been volatile recently, moving between a range of 0.8758 and 0.8767 as traders await the Bank of England's interest rate decision (BOE). In the past, after dropping to around 0.8724, the asset staged a strong recovery. Asst will go up as it breaks through the 0.8787 key level. It looks that the bold purchase was a reaction to something.
One factor that could cause a significant shift in the cross is the Bank of England's monetary policy. Surprisingly, inflationary pressures in the UK fell in August after staying above 10% for the previous month, despite rising energy prices for households. The BOE does not need to change course in light of the August drop in inflation. Despite the absence of support from economic prospects and the job market, the BOE must declare a painful 50 basis point (bps) interest rate increase.
Given that salary data is insufficient to counteract the forced inflation of household payouts, the BOE could not tolerate the higher price rise index becoming ingrained in economic behavior.
Meanwhile, efforts are being made to help the Eurozone economy recover from the growing energy crisis. It is winter in Germany, so the government has decided to save the natural gas importer Uniper.
While Russian leader Vladimir Putin has declared that gas supplies to Europe will begin if the trading bloc eliminates sanctions on the Nord Stream pipeline 2, the restrictions remain in place. Germany must ensure there are enough gas reserves to fulfill the higher demand in the winter. Western sanctions against Russia are not expected to be lifted anytime soon.