Pound Euro (GBP/EUR) Exchange Rate Drops amid Increasing UK Political Uncertainty

October 20, 2022 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Drops amid Increasing UK Political Uncertainty

Pound Euro (GBP/EUR) Exchange Rate Falls as UK Political Uncertainty Deepens

Thursday saw the Pound (GBP) weaken against the Euro (EUR) as political uncertainty in the UK continued to unfold.

This saw the GBP/EUR exchange rate trade at around €1.1451, a drop of roughly 0.2% from Thursday’s opening rates.

Pound (GBP) Capped by UK Political Chaos

Thursday saw the Pound (GBP) endure volatile trade as political uncertainty continued to rock the UK and Sterling.

Following on from Wednesday’s chaotic fracking vote, and the shock resignation of Suella Braverman, GBP investors have remained cautious during Thursday’s session.

As Liz Truss’ future as prime minister looks increasingly short, investors have kept an eye on the various statements from Conservative MPs. While her cabinet reaffirmed their support for the short term, many others across the Conservative party called for her resignation.

Thursday’s caution even spread to the bond markets, prompting gilt yields to climb after three days of recovery. Speculation mounted throughout of how long Truss has left as prime minister.


Bill Blain, a strategist at Shard Capital, explored the impact the political turbulence was having on the UK economy. He stated: ‘Traders are watching shocked at the slow motion trainwreck of UK Inc, but they are analysing the opportunities. In the next few days things could get even more chaotic as the government self-destruction deepens. Markets want to see credible solutions – and frankly that’s not going to happen...’

The cost-of-living crisis gripping the UK also contributed to the Pound’s struggle on Thursday. Which? published the results of a survey of UK households. The survey found that 9% of households are ‘struggling to get by’, with half of these skipping meals.

Euro (EUR) Climbs amid Energy Security Reassurances

Thursday saw the Euro (EUR) enjoy tailwinds during the session, with the EU looking to coordinate with other energy suppliers to circumvent a potential energy crisis over winter.

German Chancellor Olaf Scholz released a statement on Thursday morning which declared that it was possible for the bloc to free themselves from dependence on Russian gas supplies.

Chancellor Scholz stated: ‘The EU must coordinate closely with other gas consumers like Japan and Korea so as not to be in competition with each other. At the same time we are also talking with producers about an appropriate price. I am convinced: countries like the U.S., Canada or Norway, who stand with us on Ukraine's side, have an interest in Europe's energy not becoming unaffordable.’

As this plan to alleviate concerns of EU energy over the winter gained traction, EUR investors supported the single currency, bolstering it against a few of it’s peers.


Elsewhere, a UK Ministry of Defence report published on Thursday suggested that the recent admission by Russia that a ‘difficult situation’ had emerged in Kherson indicated that they were considering a major withdrawal of forces.

The optimism afforded by the report saw EUR gain support as the Ukrainian forces continued their counter-offensive.

Pound Euro (GBP/EUR) Exchange Rate Forecast: UK Politics in Focus

Looking ahead, the Pound Euro exchange rate could see fresh turbulence from UK political developments. Should the pressure on Liz Truss continue to mount, GBP could fall as volatility takes hold.

Elsewhere, Friday’s print of retail sales date for the UK could dent Sterling, with a second consecutive month of decline expected.

For the Euro, further developments from the Ukraine-Russia conflict will be the key catalyst of movement. Should the predicted withdrawal happen, EUR could be buoyed as the situation changes to favour Ukraine.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts