Pound to Euro OUTLOOK - Softer GBP EUR Currency Exchange Rate Awaiting Russia Sanctions Outcome

September 5, 2014 - Written by John Cameron

STORY LINK Pound to Euro OUTLOOK - Softer GBP EUR Currency Exchange Rate Awaiting Russia Sanctions Outcome

The latest Pound to Euro (GBP/EUR) currency exchange rate pair trended lower within the forex market on Friday, following a sharp surge in Sterling strength against the Euro yesterday. Fluctuations in the pairing were made apparent yesterday after the European Central Bank (ECB) announced that they were further reducing the already low interest rate to 0.05%.

The Bank of England (BoE) made the decision to keep the interest rate at the current low of 0.50%.

Furthermore, both currencies are trading amid the geopolitical tensions surrounding Russia and Ukraine.

Geopolitical Tensions still Pose Threat for Eurozone Growth

The EU is scheduled to implement new sanctions against Russia on Friday, following the recent move by Russia which placed troops into Ukraine. However, the EU will wait to see if Russia is abiding by the ceasefire proposed before enforcing new sanctions. Speculation varies on the amount of time the EU are willing to allow before continuing with Friday’s scheduled restrictions, with some diplomats suggesting anywhere between 72 hours and a week. One diplomat stated: ‘They wanted to give the ceasefire a chance.’ Another diplomat suggested: ‘If the ceasefire holds, then there is a possibility of not implementing sanctions at all.’

The EU is scheduled for a meeting in Brussels today which will discuss the current situation. The US has prepared a round of sanctions that could cripple the Russian economy. The UK Foreign Secretary Phillip Hammond stated: ‘There will be another step up of the pressure today when the EU meets in Brussels to decide on the next round of sanctions. Our economies are fundamentally more robust and resilient than the Russian economy and if Russia ends up in an economic war with the West, Russia will lose.’

However, Russia’s conduct has been questionable of late, and so some believe the sanctions should be placed immediately. Hammond continued: ‘If there is a ceasefire, if it is signed and if it is then implemented, we can then look at lifting sanctions off but... there is a great deal of scepticism about whether this action will materialise, whether the ceasefire will be real.’

Forecast for the GBP/EUR Exchange Rate in the Currency Market

In upcoming events for the UK and Eurozone Monday will see the release of the German Trade Balance, whilst Tuesday will see the UK Trade Balance alongside Industrial Production and Manufacturing Production statistics.

The most influential piece of data for the GBP to EUR exchange rate on Tuesday however will be seen in the Gross Domestic Product Estimate in the afternoon.

The rest of the week will be relatively quiet for UK domestic data, whilst the Eurozone has sporadic data releases due, but both economies lack majorly significant events that would alter the currencies dramatically from their current lows in the market.

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