Pound Euro Exchange Rate News: GBP/EUR Traded Erratically amid Liz Truss’ Defiant Defence of Mini-Budget

September 29, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Traded Erratically amid Liz Truss’ Defiant Defence of Mini-Budget

Pound (GBP) Wavered amid Unconvincing Truss Remarks

The Pound (GBP) found mixed success against its rivals amid a turbulent market as Prime Minister Liz Truss made her first public appearance since Friday’s mini-budget announcement.

A series of BBC interviews put Truss on the spot and faced with multiple questions over the market fallout from the tax-cutting plans. Investors were less than impressed with the prime minister’s responses, who defended the government’s fiscal plans and refused to acknowledge the market meltdown in the wake of Friday’s unveiling. Calls for reversing the measures were dismissed and on the market reaction, Truss doubled down on the belief that the government did the right thing.

Kwarteng has also been under increased pressure in bringing forward the publication of the medium-term fiscal plan, but Chris Philp, the Chief Secretary to the Treasury, ruled out a chance of that happening. Concerns remain heightened over the decision to wait for an announcement that could potentially calm the markets. Until then, expect the Pound to continue its volatile movement.

John Swinney, Scotland’s deputy first minister and a former finance secretary has warned that Truss’ stance on the mini-budget is unsustainable, saying:

‘If the UK financial system is going to collapse, they will have to change it. It is a mess this morning, an absolute mess, a total mess. I’ve never seen anything like it in my life.

‘Why is that happening? It’s because the markets don’t believe the UK any longer believes in fiscal sustainability.

‘If the UK government wants to prove to the markets that the UK government still believes in fiscal sustainability, and it wants to protect that tax position it set out last Friday, its only got one place to go - reducing spending.’

Euro (EUR) Under Pressure as Russia Announced Formal Annexation of Ukrainian Regions

Meanwhile, the Euro (EUR) remained under pressure amid multiple headwinds. Waning global market sentiment caused by the developments in Ukraine are weighing on the Euro.

Russia has announced it intends to formally annex the four controlled regions of Ukraine on Friday. Putin is said to sign the decree that would see Donetsk, Luhansk, Zaporizhzhia, and Kherson be absorbed into the Russian Federation. Ukraine and the West have since denounced the ‘sham’ referendums that supposedly saw an overwhelming majority of votes to join Russia.

Once these regions are annexed, Putin will then consider any attacks on the controlled areas a direct attack on Russia. With the nuclear umbrella then to be expanded onto these regions, both investors and the general wider world will be concerned after Putin had previously threatened to respond with nuclear weapons.

Elsewhere, confidence in the Euro area has once again fallen sharply, as the European Commission’s economic sentiment index dropped for the seventh month in a row to 93.7. Amongst consumers and companies, falling confidence was seen as retail, industry, and services all worsened. The drop in confidence was worst among consumers and manufacturers.

GBP/EUR Exchange Rate Forecast: Early Inflation Data to Worry the Euro?

Looking ahead, the Pound Euro exchange rate could see further fluctuations with the printing of the German CPI reading on Friday. An expected surge in inflation could be a double-edged sword. The Euro could rise on interest rate expectations, but inflationary pressures could continue to hamper confidence across the Euro area.


Meanwhile, shrinking GDP growth data for the UK could spell more trouble for Sterling. An expected second consecutive contraction in the UK economy could see the Pound slump once more.

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