The Pound to Euro today plummets to €1.1672 on poor economic data and trade deal disagreements arising between the UK and the EU.
Pound to Euro Today Plummets
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It was a sharp decline on Tuesday, May 24, 2022, when the Pound to Euro today lost almost 148 pips. The GBP/USD currency pair lost almost 1.2% on Tuesday.
Poor data on the manufacturing PMI reflects poor economic recovery after the pandemic and the Russia-Ukraine war. The UK-EU trade war is a cause of concern for the British Pound to Euro today.
Poor Data Adds to Pressure on the GBP/EUR
High inflation in the UK has led the Bank of England to hike rates to 1% from 0.75% in May 2022. High inflation will burden industries and households further, predict experts.
Flash services PMI has gone down from 58.9 to 51.8. Flash manufacturing PMI has come down from 55.8 to 54.6. Though the economy shows industry expansion, the manufacturing purchasing manager’s index has come down to indicate a slower industry expansion.
The living standards of the people have worsened with high inflation. More hikes are needed to prevent economic stagnation in the country, say experts. Inflation will move to double digits in October if crude prices rise higher. Unemployment levels are predicted to move lower by the end of the year. Policymakers have a tough choice to decide between high inflation and fear of a recession in the economy.
Consumer confidence shows signs of improving recently. Net lending to individuals has grown month-on-month, from 6.1 billion to 8.3 billion, strengthening the GBP/USD.
Month-on-month retail sales in the UK show good signs of recovery from -1.2% to 1.4%. Public sector net borrowing has gone up from 13.9 billion to 17.8 billion.
The British Pound against the Euro was trading higher last week with good data from retail sales and employment growth. The unemployment rate had come down.
Pound to Euro Today Moves Lower on Northern Island Protocol
There is escalating tension between the UK and the EU regarding the post-Brexit trade agreement. It may lead to a trade war, which will not be good for both regions, say leaders from other countries. The EU warns the UK regarding overriding Northern Ireland Protocol. The trade deal disagreements between the UK and the Euro add pressure on GBP/EUR.
A break in trade agreements will end all diplomatic ties with the EU.
The Trade and Co-operation Agreement (TCA) ensured tariff-free trade agreements between the UK and the EU. The TCA protocol was for quota-free trade relations between the two regions. The Northern Ireland protocol was signed in the Brexit deal between the UK Prime Minister Boris Johnson and the Euro leaders.
The Brexit deal hoped to keep the UK and the EU negotiations aligned regarding trade and regulations. It was meant to solve the Northern Ireland border issues.
But, UK Foreign Secretary Liz Truss has plans to rewrite the protocol signed with the European Union. There is a necessity to make changes in the protocol, and the government will act immediately to restore the changes, claims Truss.
Truss is in contact with the EU official Maros Sefcovic regarding trade decisions between the two regions. The British Pound to Euro today may face pressure if Brexit tension escalates.
The Brexit deal had increased paperwork in moving goods to Northern Ireland. There were many lapses when the trade deal was completed hurriedly to meet the deadline. However, the rift between the two regions shows signs of widening now.
Sefcovic issued a warning that free trade agreements may come to an end in case of a protocol revision.
The EU may burden the UK economy with tariffs or end the trade deal agreed between the two heads. The EU will start imposing tariffs on British goods if the TCA gets scrapped.
High tariffs will raise commodity prices, especially on agricultural and dairy products in the UK. Cars from Europe will become costly. The UK is already under the strain of heavy commodity prices as inflation has soared higher.
We hope that the UK would negotiate changes with the EU, says Sefcovic. Brussels hopes to settle disputes with the UK over Northern Ireland.
Major Currency Pairs
The US Dollar Index is holding on to the 101 levels. The USD fell sharply on Tuesday, May 24. The sharp fall in the US Dollar mark has unnerved investors who prefer the safe-haven currency.
The GBP/USD trades at 1.2521 during trading hours on May 24, 2022.
The EUR/USD trades at 1.0728, holding on to the $1.07 mark. After a sharp fall, the EUR to USD shows a positive move higher. The ECB president Christine Lagarde suggests that the ECB may raise interest rates in the July meeting.
Crude prices edge higher, trading at $110 per barrel.