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Pound Euro Exchange Rate News: GBP/EUR Gains Ground amid Risk On Sentiment

April 29, 2022 - Written by John Cameron

GBP/EUR Rises amid Risk On Mood

The Pound Euro (GBP/EUR) exchange rate is climbing today as a risk on sentiment bolsters demand for Sterling.

At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.1900, up roughly 0.3% from today’s opening levels.

Pound (GBP) Edges Higher on Improved Risk Appetite

The Pound (GBP) is trading higher against the majority of its peers today as an upbeat market sentiment aids GBP exchange rates.

Further support for Sterling may be coming from Thursday’s reports that post-Brexit border checks will be delayed for the fourth time.

According to Brexit opportunities minister, Jacob Rees-Moggs, this will save the UK approximately £1bn.

This is welcome news as the UK’s cost of living crisis continues to impede the UK’s economy.

The UK’s economic recovery remains a source of anxiety for GBP investors.

On Thursday, it was reported UK company insolvencies have reached a ten-year high. Insolvency firm Begbies Traynor has warned the number of UK firms in ‘critical financial distress’ increased by almost one fifth from this time last year.

In addition, Bank of England (BoE) policymakers have maintained a dovish position in recent weeks. This is weighing on interest rate hike bets and capping the Pound’s gains today.

Euro (EUR) Drops Despite Eurozone CPI Reaching Record High

The Euro (EUR) is down against the Pound (GBP) today as the Eurozone’s GDP growth rate for the first quarter slipped.

During the first three months of 2022, GDP in the bloc rose 0.2%. This is down from the previous 0.3% expansion in Q4 and missed expectations the Eurozone economy would continue to expand at the same pace in Q1.

The lower-than-forecast reading is placing pressure on EUR exchange rates.

Meanwhile, Germany’s GDP growth rate exceeded market forecasts.

During the first quarter, Germany’s economy expanded by 0.2%. This is slightly above the expected 0.1% and is a significant improvement from the previous 0.3% contraction.

Higher capital formation was largely responsible for this positive movement, however disappointing import and export balance sheets limited economic growth as a result of the Russia-Ukraine war.

Some experts have warned the Ukraine crisis is likely to remain a key risk to growth through the second quarter.

However, the Euro’s losses have been capped by the publication of the Eurozone’s consumer price index for April.

Eurozone inflation rose in line with market forecasts to strike 7.5% in April, marginally above February’s reading of 7.4%, but a new record high.

This was largely driven by energy prices, as well as food, alcohol and tobacco.

In turn, this has boosted European Central Bank (ECB) interest rate hike bets, particularly following the hawkish stance recently taken by many ECB policymakers.

GBP/EUR Exchange Rate Forecast: BoE Interest Rate Decision to Influence GBP

Into next week, the Pound Euro exchange rate may be influenced by the Bank of England’s (BoE) latest interest rate decision.

Nearing the end of next week, the central bank is expected to raise interest rates from 0.75% to 1%.

However, as this is largely priced-in, GBP investors will be looking towards BoE’s forward guidance. If BoE strikes a cautious tone, it may place pressure on Sterling.

On the other hand, the single currency is likely to be weighed on by a weak economic sentiment from the Eurozone.

Moreover, both the Eurozone’s and German final manufacturing PMI are expected to slip from their previous positions. Although both above the line of stagnation, if this prints true, it may hinder demand for the single currency.

Meanwhile, Germany’s retail sales for March are expected to hold steady at 0.3% which may provide the Euro with some limited support.

In addition, both GBP and EUR exchange rates are likely to remain susceptible to developments in Ukraine.

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