Pound Euro (GBP/EUR) Exchange Rate Strengthens as Sunak Attends British-Irish Council

Modified: Thursday, 10 November 2022 11:35 BST - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Strengthens as Sunak Attends British-Irish Council

Pound Euro (GBP/EUR) Exchange Rate Rallies as Sunak Seeks Solution to Northern Ireland Protocol

The Pound Euro (GBP/EUR) exchange rate strengthened on Thursday, as UK Prime Minister Rishi Sunak headed to Ireland to discuss the Northern Ireland Protocol.

As such, GBP/EUR rose to around €1.1442 at the time of writing, a marked jump of roughly 0.8% from Thursday’s opening rates.

Pound (GBP) Bolstered by Confidence in Sunak

The Pound (GBP) enjoyed a rally throughout Thursday’s session, as confidence in Prime Minister Rishi Sunak served to boost Sterling.

This came as Sunak headed to Ireland to meet with the Taoiseach Michael Martin, in order to discuss the Northern Ireland Protocol and restore the power share in Northern Ireland.

Proving to be a substantial headache for previous Prime Ministers, and resulting in the dissolution of Stormont – Northern Ireland’s parliament – the Northern Ireland Protocol serves to keep the country borders open to the EU, but has impacted trading speed.

While previous UK proposals have served to reopen old wounds between Northern Ireland and Ireland, Sunak’s attendance may mark further development in UK-Irish relations, which have been historically terse at best.

As such, confidence in the PM has served to draw investors towards GBP, as they hope that a trade war with the EU can be avoided.

However, the UK’s retail sector has been on a downward turn, with many companies reporting a slide in profits and pointing towards a declining labour market.

A UK Job report released on Thursday from KPMG and REC expanded upon this. It showed: ‘When explaining the latest drop in candidate numbers, recruiters commented that people had become more reluctant to switch or seek out new roles due to concerns around the weaker economic outlook, fewer foreign workers and a low unemployment rate.’

As such, the bleak economic news may have served to place a cap on any potential gains for Sterling on Thursday.

Euro (EUR) Weakened by Ukraine-Russia Developments

The Euro (EUR) saw downbeat trade on Thursday, as the Ukraine-Russia conflict continued to develop.

With the Russian Defence Secretary ordering a retreat from Kherson, the Ukrainan forces managed to recapture the illegally annexed territory. However, Ukrainian forces remained cautious as it seemed that Russian forces would not leave the area peacefully and remained vigilant as they continue to reclaim territory.

While the reclamation of Kherson could signal a turning point in the conflict, investors remained wary during Thursday’s trade.

A risk-averse market sentiment served to negate any potential gains the optimism could bring, as the wider EU economy continued to weaken.

Further weakening the Euro was the European Central Bank’s final bulletin for 2022. The report outlined the issues effecting the blocs’ economy.

The report stated: ‘A long-lasting war in Ukraine remains a significant risk. Confidence could deteriorate further and supply-side constraints could worsen again. Energy and food costs could also remain persistently higher than expected. A weakening world economy could be an additional drag on growth in the euro area.’

Pound Euro (GBP/EUR) Exchange Rate Forecast: UK GDP to Weaken Pound?

Looking ahead, the core catalyst of movement for the GBP/EUR exchange rate is likely to be Friday’s incoming UK GDP release.

With a contraction forecast in Q3 data and monthly data, Sterling may weaken as the data demonstrates a darkening outlook for the UK economy, and further stokes recession fears.

For the Euro, with macroeconomic data thin on the ground, the single currency is likely to trade on market sentiment and further developments in the Ukraine-Russia war. The longer the conflict drags on, the more substantial effect it will continue to have on the bloc’s economy.

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