Pound Euro Exchange Rate News: GBP/EUR Rangebound as EUR Investors Await ECB Announcement

April 14, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Rangebound as EUR Investors Await ECB Announcement

GBP/EUR Muted Ahead of ECB’s Monetary Policy Decision

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range today as EUR investors await the European Central Bank’s (ECB) monetary policy decision and forward guidance.

At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.2038, with minimal movement from today’s opening levels.

Euro (EUR) Subdued as Investors Await ECB’s Forward Guidance

The Euro (EUR) is flat against the Pound (GBP) today as EUR investors look towards the ECB’s forward guidance following its monetary policy decision.

As per market consensus, the central bank is expected to leave interest rates on hold at 0%, whilst potentially adopt a more hawkish outlook.

The minutes from the ECB’s March policy meeting revealed how a significant number of policymakers called for faster policy normalisation. As a result EUR investors are hoping the bank’s forward guidance will be more hawkish in tone.

The ECB is likely to maintain plans to bring quantitative easing to a close; however, the Russia-Ukraine war is still a cause for concern.

As the West continues to impose sanctions against Russia, investors remain cautious of the single currency as the economic fallout across the bloc is not yet known.

Should Vladimir Putin retaliate against the Western sanctions, such as restrict the importation of Russian oil in Europe, it may hinder the bloc’s economy.

UBS economist Reinhard Cluse said:

‘A key question is whether the flow of Russian energy to Europe will remain smooth.

‘Should volume restrictions ensue, we would see a much-increased risk of a Eurozone recession, which would likely prompt the ECB towards greater caution.’

Furthermore, Putin has stated the peace talks between Russian and Ukraine has come to a ‘dead end’ as he claims Kyiv has broken the agreements reached in Turkey.

This is stoking additional pressure on EUR exchange rates as geopolitical developments remain uncertain.

Pound (GBP) Mixed amid UK’s Cost of Living Crisis

The Pound (GBP) is rangebound against the Euro (EUR) today after soaring on Wednesday in response to the latest consumer price index reading.

In March, inflation surged to a 30-year high, reaching 7%, above February’s 6.2% and market forecasts of 6.7%.

According to the Office for National Statistics (ONS), this was largely due to a significant rise in energy prices.

This triggered a sharp appreciation in the Pound yesterday as it bolstered Bank of England (BoE) rate hike bets.

The UK Chancellor of the Exchequer, Rishi Sunak, has held the global supply chain bottlenecks and the Ukraine crisis responsible for the surge in energy prices.

Sunak reiterated the support released in his spring statement:

‘I know this is a worrying time for many families, which is why we are taking action to ease the burdens by providing support worth around £22bn in this financial year, including for the most vulnerable through our household support fund.

‘We’re also helping as many people as possible into work – the best way for families to gain economic security in the longer term.’

Moreover, as the Ukraine crisis deteriorates, GBP investors are cautious of the risk-sensitive Sterling.

GBP/EUR Exchange Rate Forecast: Ukraine Crisis to Maintain Focus

For the foreseeable future, Russia’s invasion of Ukraine is likely to remain the key driving force of the Pound Euro exchange rate.

Should Moscow retaliate against the sanctions imposed by the West, it may hamper the economic recovery of both the UK and across the bloc, dampening demand for GBP and EUR.

Today, the ECB’s forward guidance will be the key catalyst of movement for EUR exchange rates: will ECB strike a hawkish tone as expected?

On the other hand, due to an absence of UK economic data for the rest of this week’s session, the Pound is likely to be impacted by market sentiment and external factors.

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TAGS: Forecasts