Pound Euro Exchange Rate News: GBP/EUR Rises as Ukraine Concerns Grow in Light of Apparent Russian Atrocities

Modified: Tuesday, 5 April 2022 12:35 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Rises as Ukraine Concerns Grow in Light of Apparent Russian Atrocities

GBP/EUR Buoyed as Russia-Ukraine War Deteriorates

The Pound Euro (GBP/EUR) exchange rate is trading higher today as ‘genocide’ comes to light after Russian military forces withdraw from certain areas of Ukraine.

At the time of writing, the GBP/EUR exchange rate is trading at approximately $1.1949, roughly up 0.2% from today’s opening levels.

Euro (EUR) Stumbles in Response to Ukraine Crisis

The Euro (EUR) is facing headwinds against the Pound (GBP) this morning amidst concern a negotiated end to the war in Ukraine may be further off than previously thought.

Following last week’s peace talks, Russia reduced military forces areas around Kyiv. Over the weekend however evidence began to emerge of alleged atrocities committed by Russian troops who previously occupied this area.

Volodymyr Zelensky found ‘it very difficult to talk’ after witnessing the mass ‘genocide’ in Bucha, and suggested peace talks would be challenging going forward.

In turn, this is weighing on the Euro as the Eurozone is particularly sensitive to any economic disruption caused by the war.

On the other hand, upbeat Eurozone services PMI are capping the single currency’s losses.

The final reading for March’s data printed at 55.6, a modest rise from February’s 55.5 and above the preliminary predictions of 54.8.

This is the biggest expansion in the service sector in four months and is largely due to eased coronavirus-related restrictions which supported tourist and recreation industries.

Chris Williamson, Chief Business Economist at S&P Global said:

‘The further reopening of the eurozone economy amid the fading Omicron wave has provided a welcome tailwind to business activity in March, helping drive a further solid expansion from the slowdown seen at the start of the year.

‘However, the resilience of the economy will be tested in the coming months by headwinds which include a further spike in energy costs and other commodity prices due to Russia’s invasion of Ukraine, as well as worsening supply chain issues arising from the war and a marked deterioration in business optimism regarding prospects for the year ahead.’

Pound (GBP) Climbs Following Strong PMI Figures

The Pound (GBP) is edging higher against the Euro (EUR) today in response to the UK’s services PMI data.

The final figures for March were revised higher, with the index reaching 62.6. This is above both preliminary expectations of 61 and February’s 60.5.

This was the second-largest expansion in service sector since 1997 and was a result of a continued economic rebound following the omicron-related slowdown at the end of 2021.

Tim Moore, Economics Director at S&P Global, commented:

‘UK economic growth continued to surge higher in March after an Omicron-induced slowdown at the turn of the year.

‘Service sector companies led the way as business activity expanded at the fastest pace since the post-lockdown recovery seen last May.

‘There were widespread reports citing a boost to business and consumer spending from the roll back of pandemic restrictions.’

However, the UK’s cost of living crisis is limiting GBP’s gains today amid concerns a continued rise in inflation will further squeeze households’ income and limit service sector growth in the near-term.

GBP/EUR Exchange Rate Forecast: Russian-Ukrainian Negotiations Take Centre Stage

The Pound Euro exchange rate is likely to remain heavily influenced by Russia’s invasion of Ukraine.

As new information comes to light, damaging negotiating relations, it may hinder demand for both GBP and EUR.

Later in the week, the single currency may be impacted by speeches from European Central Bank (ECB) Vice President, Luis de Guindos, and policymakers, Isabel Schnabel, Fabio Panetta and Philip Lane.

Should these speeches hint at future monetary policy with a dovish undercurrent, it may dent EUR further.

Meanwhile, Bank of England (BoE) policymaker, Huw Pill, is scheduled to deliver a speech on Thursday.

Similarly, if he strikes a broadly dovish tone, it may burden GBP exchange rates.

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TAGS: Pound Euro Forecasts