Pound Euro Exchange Rate Forecast, News: GBP/EUR Plunges to New Monthly Low

Modified: Wednesday, 30 March 2022 16:05 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Forecast, News: GBP/EUR Plunges to New Monthly Low

The Euro (EUR) Buoyed by Renewed Peace Talks Despite Crashing Consumer Sentiment

The Euro is seeing moderate upswing against the Pound amid growing optimism around the Ukraine-Russia conflict and a return to risk-on sentiment. Representatives of both Ukraine and Russia met today in Turkey to further peace talks and both are hoping for a diplomatic solution to the ongoing conflict.

The negotiators alluded to progress and even hinted at a potential Presidential meeting between the two nations and Russia potentially scaling back military operations around northern Ukrainian cities in order to foster more constructive conditions for talks.

The chance for a negotiated end to the conflict is welcome news to EUR investors, with the Euro having suffered over the past month due to concerns over how the war might impact the Eurozone economy.

Providing a moderate headwind to Euro gains came in the form of German consumer confidence data, with the GFK Consumer Climate Indicator falling to -15.5. The lowest figure since February 2021, and surpassing market expectations of -14, comes at a time where inflation and the Ukraine war weighs heavily on consumers.

GfK consumer expert, Rolf Bürkl said of the drop; "In February, hopes were still high that consumer sentiment would recover with the easing of pandemic-related restrictions. However, the war in Ukraine caused these hopes to vanish into thin air. Increasing uncertainty and the sanctions against Russia have caused energy prices in particular to skyrocket and are thus having a noticeable impact on general consumer sentiment."

Pound (GBP) Struggles in the Aftermath of Dovish BoE Comments

The Pound (GBP) is slipping further against the Euro today as the Bank of England (BoE) failed to adopt a more hawkish approach to monetary policy as the country moves through 30-year high inflation.

Andrew Bailey, Governor of the BoE delivered a speech yesterday that failed to inspire confidence in investors who were hoping a more aggressive approach would quell, with Bailey refusing to signal whether GBP investors can expect another rate hike in May.

Bailey said: ‘We have been very cautious on forward guidance language because things are so uncertain. (It) will take time before we really come to a proper assessment of how the joint experience of COVID and Ukraine invasion causes world economy to emerge into new steady state. We are at an even more challenging point for global economy than after the global financial crisis.’

Limiting any further losses, consumer credit data was released, beating out market forecasts. The biggest rise in consumer lending in over five years saw more the figure jump up by £1.9 billion, showing consumers are still spending, a sure sign of the growing cost-of-living squeeze.

GBP/EUR Exchange Rate Forecast: Euro Data to Boost or Stall Pound?

Looking ahead, the Pound Euro (GBP/EUR) could struggle to find any further support in the UK with a lack of domestic data due in the first half of this week. All eyes will be on the release of German inflation data tomorrow, with the figure expected to hit 6.3%, a jump up from 5.1% from February.

Any further progress in the Ukraine-Russia peace talks could boost the Euro, and with rumours of a presidential meeting between both countries point to a more diplomatic turn of events, bringing the end to the war that small step closer.

With several Eurozone speeches penned in for this week, the single currency could be set for a flurry of movement and could leave the Sterling exposed to further losses.

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