Pound Euro Exchange Rate News: GBP/EUR Rangebound Following Failure of Russian-Ukrainian Peace Talks

March 11, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Rangebound Following Failure of Russian-Ukrainian Peace Talks

GBP/EUR Muted as Ukraine Crisis Continues to Drive Volatility

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range during today’s session after a disappointing conclusion to yesterday’s Russian and Ukrainian peace talks.

At the time of writing, the GBP/EUR exchange rate is trading at approximately $1.1913, with minimal movement from today’s opening levels.

Euro (EUR) Directionless Amid Ukraine Peace Talk Disappointment

The Euro (EUR) is mixed against the Pound (GBP) today as yesterday’s meeting between Russian and Ukrainian foreign ministers, Sergei Lavrov and Dmytro Kuleba, ended without any meaningful progress towards a ceasefire.

Thus far, neither country appears willing to compromise: Russia is requesting Ukraine to become a neutral-status state whilst Ukraine is calling for a ceasefire.

Overnight bombings in various Ukrainian cities as well as reports Russia is preparing for a fresh attack on Kyiv have further sapped EUR sentiment this morning.

Meanwhile, the European Central Bank (ECB) concluded its latest policy meeting yesterday, holding interest rates steady at 0%.

ECB opted to revise its quantitate easing programme, with the bank’s asset purchase progamme now expected to be wound down by the third quarter which may support a rate hike in October.

However, some experts believe geopolitical tensions will prevent ECB from increasing rates this year.

Fidelity International's Anna Stupnytska said:

‘We do not expect the ECB to hike rates this year, despite change in market pricing. The risk is skewed towards more QE, not less, especially if gas supplies from Russia to Europe are disrupted going forward.’

Meanwhile, German inflation printed in line with preliminary estimates in February, confirming a rise from 4.9% to 5.1% and capping the Euro’s losses this morning.

Pound (GBP) Edges Higher Following Better-Than-Expected GDP

The Pound (GBP) is trading slightly higher against the Euro (EUR) this morning as UK GDP overshot forecasts in January.

The figures reveal that the British economy expanded by 0.8% during the first month of 2022, rallying from December’s 0.2% contraction and printing above the expected 0.2%.

This is the largest expansion in 7 months, with the figures also reporting all sectors of the economy expanded.

Darren Morgan, head of economic statistics, said:

‘All sectors grew in January, with some industries that were hit particularly hard in December now performing well, including wholesaling, retailing, restaurants and takeaways.’

The UK’s GDP is now exceeding its pre-pandemic levels which is bolstering GBP.

Furthermore, industrial production also beat expectations in January as production growth climbed from 0.3% to 0.7%.

However, some experts are wary of these positive figures, stating that geopolitical unrest may hamper the industries potential in the near future.

A consultant at Capital Economics said:

‘…the cost of living crisis and the influence of the war in Ukraine probably means this is as good as it gets for the year.’

GBP/EUR Exchange Rate Forecast: Ukraine Crisis to Hold onto Limelight

The Russia-Ukraine war will continue to be the main driving force of the Pound Euro exchange rate for the foreseeable future.

Should the war continue to intensify, Western leaders may further increase sanctions on Russia. This could lead to additional geopolitical uncertainty and weaken both the Pound and Euro.

Into next week, the Pound may be buoyed by some employment data whilst a drop in German economic sentiment could weaken the Euro.

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