Pound Euro Exchange Rate News: GBP/EUR Rangebound as Eurozone Inflation Soars to Record High

Modified: Friday, 1 April 2022 11:05 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Rangebound as Eurozone Inflation Soars to Record High

GBP/EUR Mixed as Eurozone CPI Climbs to All-Time High

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range today after Eurozone inflation surged to new-record high.

At the time of writing, the GBP/EUR exchange rate is trading at approximately $1.1876, with minimal movement from today’s opening levels.

Euro (EUR) Directionless as CPI Reading Breaks Record

The Euro is rangebound against the Pound (GBP) this morning after the Eurozone’s flash consumer price index soared to an all-time high.

The CPI reading struck a new record high for the fourth consecutive month: in March, inflation soared from 5.9% to 7.5% smashing expectations for a more modest rise to 6.6%.

The bumper inflation reading was largely due to high energy prices driven by the Ukraine crisis.

Many experts are concerned about the negative ramifications Vladimir Putin’s ‘Special Military Operation’ will leave on the Eurozone’s economy.

OECD Chief Economist Laurence Boone said:

‘I really believe we’re underestimating the medium-term impact of this war.

‘The longer the war will last, the more uncertainty we have and the more worried we’re getting because uncertainty deters consumer purchases and business investment.’

This may cause the European Central Bank (ECB) to reassess its current dovish outlook on monetary policy and may renew rate hike bets.

Meanwhile, Russian troops have reportedly left Chernobyl nuclear power plant which had been seized at the beginning of the invasion.

However, many are dubious over Russia’s next plan of action and this, in turn, is capping any gains the Euro may have attained today.

Pound (GBP) Subdued amid UK Cost-of-Living Crisis

The Pound (GBP) is flat against the Euro (EUR) today as the UK’s new energy price cap comes into effect.

Although announced in February, the rise in energy price cap is adding strain to the UK’s cost-of-living crisis this morning.

Households across the UK will witness up to 54% increase in energy costs; this may limit consumer spending and hamper the UK’s economic recovery.

Following on from the Bank of England’s (BoE) dovish forward guidance at its last meeting, as well as a 30-year high inflation, the Pound is likely to struggle against the majority of its peers in the short-term.

In addition, the UK’s final manufacturing PMI has fallen further-than-expected, printing at 55.2, down from a preliminary estimate of 55.5 and significantly below the previous reading of 58.

Meanwhile, yesterday’s UK GDP print is further capping GBP’s losses this morning.

The data revealed the UK economy expanded by 1.3% during the fourth quarter, exceeding the final estimate of 1%. This is considerably above the third quarter’s downwardly revised 0.9%.

The Office of National Statistics (ONS) has recognised human health and social work sectors as the largest contributors to the UK’s economic growth, however export trade is still below pre-pandemic levels.

GBP/EUR Exchange Rate Forecast: Ukraine Crisis Takes Focus

Looking ahead, Russia’s invasion of Ukraine is likely to continue dominating the Pound Euro exchange rate.

Should peace talks remain somewhat positive, it may boost demand for both GBP and EUR.

Into next week, the Euro may be buoyed by Germany’s trade balance for February. The figures are forecast to double the previous €3.5 billion and report a €7.1 billion surplus.

Moreover, the Eurozone’s final services PMI are expected to confirm a slight drop from 55.5 to 54.5 though above the line of stagnation.

On the other hand, a lack of notable UK economic data during the first-half of next week’s session will leave Sterling exposed to market sentiment and external factors.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts