Pound Euro Exchange Rate News: GBP/EUR Climbs amid Fresh Concern over War in Ukraine

April 4, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Climbs amid Fresh Concern over War in Ukraine

GBP/EUR Boosted as Ukraine Crisis Intensifies

The Pound Euro (GBP/EUR) exchange rate is buoyed today in response to geopolitically-driven weakness in the single currency.

At the time of writing, the GBP/EUR exchange rate is trading at approximately $1.1912, roughly up 0.4% from today’s opening levels.

Euro (EUR) Loses Ground amid Fresh Ukraine Concerns

The Euro is stumbling against the Pound (GBP) this morning as Ukraine crisis continues to be a source of uncertainty for the single currency.

The Euro remains highly sensitive to developments in Eastern Europe due to the Eurozone’s close proximity to the conflict as well as the vulnerability of the bloc’s economy to any fallout.

Despite negotiations reportedly making headway last week, Ukrainian President Volodymyr Zelensky has labelled Russian troops ‘murderers, torturers, rapists, looters’ today after bodies were discovered near Kyiv.

EUR investors fear EU leaders could launch a fresh round of sanctions in response to the reported evidence of Russian atrocities in areas in which Moscow has pulled back its forces.

The downturn in the Euro also comes in spite of Germany’s trade balance surplus widening further-than-expected.

In February, Germany’s trade balance printed at €11.4 billion, up from January’s €3.2 billion and the market forecast of €7.1 billion.

However, this is down from €17.9 billion a year earlier, dampening today’s data.

Moreover, February’s imports increased by 4.5%, up from the previous -4% and above the expected 1.4%. Meanwhile, exports printed at 6.4%, above both the predicted 1.5% and January’s 3% contraction.

The majority of trade occurred within EU countries, though trade with non-EU countries increased by 2.1%, namely the US, China and the UK.

At the same time, trade with Russia contracted by 7.3% as Western leaders imposed sanctions against Russia due to Vladimir Putin’s invasion of Ukraine.

Pound (GBP) Boosted Despite UK Cost of Living Crisis

The Pound is weak against the majority of its peers this morning as the UK’s cost of living crisis weighs on GBP appeal.

The UK is suffering from high inflation: having reached 6.1% in February and expected to reach 8% in Mid-April, it is forcing UK consumers to reconsider when spending on luxuries.

In turn, tightened disposable incomes are restricting the UK economy as families focus on necessities.

According to PwC, the UK’s consumer confidence has witnessed a ‘significant and sustained drop-off’ as energy prices surge, squeezing families’ resources.

Lisa Hooker, Leader of Industry for Consumer Markets, PwC UK, commented:

‘This shift in sentiment is both significant and sudden, with consumer spending expectations moving towards more essential areas at the expense of discretionary items.

‘Businesses that help customers by offering them the options to trade down are more likely to keep their loyalty for when things get better.’

GBP/EUR Exchange Rate Forecast: The Ukraine Crisis to Take Centre Stage

Looking ahead, Russia’s invasion of Ukraine is likely to remain the key motivator for the Pound Euro exchange rate.

If relations turn sour, it may dampen demand for both GBP and EUR.

Later today, Sterling may be influenced by Bank of England’s (BoE) policymaker, Jon Cunliffe.

If Cunliffe delivers a broadly dovish tone, it may weigh on GBP.

On the data front, tomorrow services PMI is scheduled for release. The UK figures are expected to confirm a reading of 61, up from 60.5. Should this print true, it may support GBP.

On the other hand, the Eurozone’s services PMI are forecast to slip from 55.5 down to 54.8 which may hamper EUR.

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TAGS: Pound Euro Forecasts