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Pound Euro Exchange Rate News: GBP/EUR Collapses on Hawkish ECB Remarks

April 21, 2022 - Written by John Cameron

GBP/EUR Nosedives as ECB Delivers Hawkish Tone

The Pound Euro (GBP/EUR) exchange rate is plummeting today as a result of hawkish comments from European Central Bank (ECB) policymakers.

At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.1990, down roughly 0.5% from today’s opening levels.

Euro (EUR) Skyrockets as ECB Rate Hike ‘Possible’

The Euro (EUR) is trending higher against the majority of its peers this morning, in the wake of some hawkish comments from an ECB policymaker.

According to ECB vice-president Luis de Guindos, the central bank’s stimulus programme should end in July.

In an interview with Bloomberg, De Guindos stated:

‘My opinion is that the programme should end in July and for the first rate hike we will have to see our projections, the different scenarios and, only then, decide.

‘From today’s perspective, (raising rates in) July is possible and September, or later, is also possible.’

This morning, ECB policymaker Pierre Wunsch echoed the hawkish position, claiming a rate hike ‘would be a no brainer’.

An interest rate hike would aim to rein-in soaring inflation across the bloc.

Finalised figures published this morning showed inflation jumped to 7.4% in March. This is considerably higher than 5.9% in February, though below a preliminary reading of 7.5%.

The high inflation is largely due to Russia’s invasion of Ukraine. As the west imposed sanctions against Russia following Vladimir Putin’s ‘special military operation’, energy costs across Europe soared to record high levels.

Pound (GBP) Plummets amid UK Political Anxiety

The Pound (GBP) is dropping against the Euro (EUR) today as UK headlines focus on the ‘Partygate’ scandal.

The UK Prime Minister, Boris Johnson, is currently being scrutinised for his actions during the 2020 lockdown.

Despite repeatedly denying any wrongdoing, last week Johnson was fined for being in breach of laws set by his own government during the pandemic.

As a result, the opposition have tabled a motion to investigate whether Johnson misled parliament.

Under ministerial code, should Johnson be found guilty of knowingly misleading parliament, he will be forced to resign.

However, Conservative MPs are seeking to delay the vote.

Johnson says he is ‘very keen for every possible form of scrutiny’ but believes MPs should have access to the ‘full facts’ before an inquiry commences.

This is driving uncertainty in UK politics and is weighing on GBP exchange rates.

Furthermore, the risk-sensitive Sterling is being pressured by the ongoing war in Ukraine.

GBP/EUR Exchange Rate Forecast: Will BoE Echo Dovish Position?

Looking ahead, the Pound Euro exchange rate is likely to be influenced by a number of Bank of England (BoE) speeches scheduled.

BoE Governor Andrew Bailey is set to deliver a speech tomorrow. Should Bailey reiterate the central bank’s dovish position, it is likely to weigh on demand for Sterling.

Similarly, BoE policymaker Catherine Mann is expected to speak later this afternoon. Will a cautious outlook place additional pressure on GBP exchange rates?

On the data front, the Eurozone’s consumer confidence for April is forecast to slip. If this prints true, it may hamper the single currency’s potential.

Meanwhile, Russia’s invasion of Ukraine is likely to continue dominating market sentiment, influencing the appeal of both GBP and EUR.

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