EUR GBP Back Above 0.5600 Ahead of PMIs and BoE

EUR GBP Slumps on Weak PMIs and Bank of England

The EUR GBP exchange rate was 0.33% higher on Wednesday as two energy firms in the UK faced bankruptcy over the recent price surge. Today will see the latest flash PMI business activity numbers for the British and European economies. The Bank of England will also have its latest interest rate meeting and monetary policy announcement.

The EUR to GBP rate trades back above the 0.8600 level which provided resistance in recent weeks.

UK Energy firms supplying ‘six million homes’ face collapse

Six million UK households could see their energy suppliers collapse due to soaring gas prices it has emerged.

Up to one-in-four British homes use companies whose wholesale supplies were not ‘hedged’ or insured against market fluctuations, industry sources said.

Wholesale prices for gas have increased by 250% since the start of the year, and almost 70% since August, meaning those unprotected firms are losing money on the energy they supply to consumers.

Bulb, which currently has 1.7million customers, is currently seeking financing, however the firm has some hedges in place with fixed contracts. It also emerged that Igloo Energy and Green were seeking administrator advice.

Seven firms have already stopped trading this year, with the head of regulator Ofgem warning more are likely to follow leaving hundreds of thousands of customers in limbo.

However, UK business secretary Kwasi Kwarteng rejected claims that there could be only 10 energy firms left by the end of the year as he repeated his stance that “lights won’t go out” over Christmas.

“’I don’t see how they got to that figure. I would be very surprised if we got to that figure … it is not something I am anticipating,” Kwarteng said.

European governments also taking action on energy prices

The surging gas and electricity costs are also forcing European governments to discuss billions of euros in aid for households and suppliers, as concern mounts over a deepening winter energy crisis.

EU energy ministers will meet this week to plan national responses to the surge in wholesale gas prices, amid concern that they will stall Europe’s post-lockdown economic recovery.

Italy is expected this week to unveil a multibillion-euro support package for households this week, which is said to be in the realm of €4.5bn”. Rome has already spent €1bn intervening directly in the energy market to lower prices.

Italy’s plans follow Spain’s decision last week to tackle what it says are energy companies’ excess profits and provide support to consumers.

Equinor, the Norwegian state-controlled oil company, said on Monday that it would increase its gas supply to Europe by boosting production at two North Sea fields from Friday. Equinor said it was also looking at further ways to boost exports.

“We believe that this is very timely as Europe is facing an unusually tight market for natural gas,” said Helge Haugane, head of gas and power at Equinor. Norway is Europe’s largest natural gas supplier behind Russia.