The Pound falls as the BoE raise interest rates to 1%, the highest level since 2009 and warns of a risk of recession as energy prices continue to rise. The cost of living crisis worsens and impacts the UK economy and inflation.
Inflation is already at its highest level in 30 years, and it could rise to 10% by the end of 2022. The rising costs of fuel, energy, food, and importing goods are becoming more and more expensive. The Ukraine/Russia war has exacerbated a problem that is only going to get worse. Households are feeling the pinch, and many are already on the breadline.
With the UK economy expecting to contract in Q4, the BofE has now warned of the risk of a recession. The BoE said
"Global inflationary pressures have intensified sharply following Russia’s invasion of Ukraine. This has led to a material deterioration in the outlook for world and UK growth.
Concerns about further supply chain disruption have also risen, both due to Russia’s invasion of Ukraine and to Covid-19 developments in China.”
GBP/EUR is now trading at levels last seen in December 2021.
On €200,000, that is a difference of £2,500.
The US Dollar is still at 5-year high against the Euro.
The US Dollar should remain attractive as long as the Ukraine/Russian war and the lockdowns in China continue.
Euro has weakened despite the re-election of Macron. Germany, the largest economy in the EU, is set to cut its growth forecasts. The Ukraine/Russia war is having an impact on the German economy.
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