Pound Euro Exchange Rate News: GBP/EUR Fluctuated Wildly in the Wake of Scathing IMF Comments

September 28, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Fluctuated Wildly in the Wake of Scathing IMF Comments

Pound (GBP) Under Pressure amid Rock-Bottom Confidence

The Pound (GBP) struggled for demand on Tuesday in the wake of scathing comments from the International Monetary Fund (IMF) on the UK’s unfunded fiscal plans.

Despite a moderate improvement over the dramatic drop-offs Sterling experienced in the wake of the announcement of Chancellor Kwasi Kwarteng’s sweeping tax cuts, the Pound is still under pressure from investors lack of confidence in the UK economy. The IMF joined the latest chorus in criticism as they released a rare critique in the government’s handling of the mounting economic crisis. They said:

‘We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.

‘However, given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy.
The IMF also warned that the tax cutting measures will likely increase inequality in the UK. Ahead of Kwarteng’s statement in November, the IMF has urged the government to reconsider a more targeted and careful fiscal support for those who need it most.

Lending some moderate support to the Pound was an announcement from the Bank of England (BoE) that it will intervene in the bond markets to stabilise them. Following on from a reassuring speech from BoE Chief Economist Huw Pill, the central bank said they are closely monitoring developments in the financial market and will temporarily purchase UK government bonds to calm the volatile markets.

Euro (EUR) Quiet amid Escalating Ukraine Tensions

Meanwhile, the Euro (EUR) is under increased pressure from mounting fears emanating from the Ukraine invasion.


Four Russian-controlled regions in Ukraine held referendums over the weekend to establish whether the citizens wanted to be absorbed by Russia. Unsurprisingly, Russian officials posted in the regions have announced overwhelming majority votes for joining the Russian Federation. Concerns are now growing of the immediate annexation of these regions and any attempt of recapturing from Ukraine will be seen as a direct attack on Russia.

Meanwhile, the two major leaks in the Nord Stream 1 pipeline have all been confirmed to be explosions, stoking fears of sabotage from Russia. Tensions were already high amidst a standoff between Europe and Russia over energy supplies and the latest disruption of gas will likely deter investors. European Commission President Ursula Von der Leyen said the leaks were sabotage, and added:

‘Any deliberate disruption of active European energy infrastructure is unacceptable and will lead to the strongest possible response.’

GBP/EUR Exchange Rate Forecast: Central Bank Speeches to Inspire Movement?

Looking ahead, without major data left for the rest of Wednesday, investors will be monitoring speeches from both the ECB and the BoE.

In the wake of the BoE intervening and buying government bonds to ease the volatile market, a speech from MPC member Swati Dhingra could shed further light on the BoE’s plans of allaying investors’ fears in the UK economy.

Meanwhile, any further developments in Ukraine over the ‘sham’ referendums and the sabotaged pipeline, the Euro could fall on a nervous global market sentiment.

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TAGS: Pound Euro Forecasts