Pound Euro Exchange Rate News: GBP/EUR Stumbles Following Hawkish ECB

Modified: Friday, 8 April 2022 10:35 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Stumbles Following Hawkish ECB

GBP/EUR Slips Following Hawkish ECB Account

The Pound Euro (GBP/EUR) exchange rate is trading lower today as the single currency relishes in the European Central Bank’s (ECB) monetary policy meeting accounts for March.

At the time of writing, the GBP/EUR exchange rate is trading at approximately $1.1993, roughly down 0.3% from today’s opening levels.

Euro (EUR) Gains Ground in Response to ECB’s Hawkish Remarks

The Euro (EUR) is rising against the Pound (GBP) this morning following publication of the meeting accounts from last month’s policy meeting.

The accounts suggest ECB policymakers are prepared to normalise policy at a faster rate than previously predicted.

This comes as policymakers expect Eurozone inflation will hold above ECB’s target of 2% throughout 2023.

The accounts noted:

‘A large number of members held the view that the current high level of inflation and its persistence called for immediate further steps towards monetary policy normalisation.

‘It was argued that, for all practical purposes, the three forward guidance conditions for an upward adjustment of the key ECB interest rates had either already been met or were very close to being met.’

Meanwhile, Russia’s invasion of Ukraine continues to limit EUR’s gains as investors continue to worry about the potential ramifications of a prolonged conflict on the Eurozone economy. Following evidence of atrocities being committed by Russian troops whilst they occupied areas surrounding Kyiv, hope of peace talks finding a diplomatic solution have dwindled.

Pound (GBP) Drops Following Dovish BoE Speech

The Pound (GBP) is edging lower against the Euro (EUR) this morning in response to yesterday’s dovish speech from Bank of England (ECB) policymaker, Huw Pill.

Pill brought into question ‘…whether monetary policy is the appropriate tool to address these sovereign market functioning concerns’.

This comes as the UK’s cost of living crisis damages the economic recovery following the pandemic and the Russia-Ukraine war.

Surging inflation – having hit 6.2% in February and expected to reach 8% in mid-April – is stretching the income of working-class families.

This has hampered GBP investors’ rate hike bets and is weighing on GBP exchange rates.

However, Boris Johnson is hopeful his newly revealed energy strategy will improve Britain’s energy independence and limit the country’s vulnerability to future price volatility.

Johnson has presented his plans for Britain to increase solar, wind, hydrogen and nuclear production to create ‘clean power’.

Although Kwasi Kwarteng, UK Secretary of State for Business, Energy and Industrial Strategy, has referred to the strategy as a ‘medium-term’ solution, it is providing GBP with some support.

GBP/EUR Exchange Rate Forecast: Russia-Ukraine War to Remain in Limelight

For the foreseeable future, Russia’s invasion of Ukraine is likely to continue driving volatility into the exchange rates of both GBP and EUR.

Should negotiations remain at an impasse the GBP/EUR exchange rate may continue to trade erratically.

Into the first-half of next week, Sterling may be buoyed by the UK’s GDP for February: the figures are expected to show the economy expanded by 0.5%.

However, this is slightly down from January’s 0.8%.

Furthermore, the UK’s unemployment rate is forecast to decrease marginally from 3.9% to 3.8% in February, somewhat boosting GBP.

On the other hand, Germany’s latest ZEW economic sentiment index could place some pressure on the Euro as analysts are predicting April will have bought another slump in sentiment.

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TAGS: Pound Euro Forecasts