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Pound Euro Exchange Rate News: GBP/EUR Traded Narrowly on Renewed NI Protocol Hopes

December 2, 2022 - Written by John Cameron

Pound (GBP) Supported by Northern Ireland Protocol Resolution



The Pound (GBP) struggled to gather much strength amid a lack of major data. But it did find support from hopes of an amicable resolution to the Northern Ireland protocol. With growing fears of a trade war between the EU and UK brewing, both sides had hoped for a solution.

The Irish Minister for Foreign Affairs and Defence, Simon Coveney, said on Friday that a ‘landing zone on the protocol is possible in the next few weeks’. Trust has been growing between both the UK and the EU over Brexit negotiations. The comments came after European Commission President Ursula von der Leyen also lent credence to negotiations edging closer. Von der Leyen mentioned encouraging meetings with UK Prime Minister Rishi Sunak and remained ‘very confident’ a solution is close.

Meanwhile, the cost-of-living crisis continued to weigh on Sterling. The British Retail Consortium (BRC) released more sobering findings as footfall in UK shops fell once more, as November’s figures dropped 13.3% below pre-pandemic levels. The worsening living cost squeeze is putting consumers off Christmas spending and makes for bleak readings for retailers. Helen Dickinson, Chief Executive of BRC, commented:

‘Footfall took another stumble as the cost-of-living crisis put off some consumers from visiting the shops in November. Others opted to stay home due to the scattering of rail strikes or chose the World Cup over shopping visits.

‘Rising inflation and low consumer confidence continue to dampen spending expectations in the run up to Christmas. Despite retailers doing their best to keep prices as low as possible for their customers, financial concerns are trumping spending for many households.’

Euro (EUR) Quiet Despite Agreement on Russian Oil Price Cap



Meanwhile, the Euro (EUR) also struggled for demand amidst a flurry of mixed data and hopes of a Russian oil price cap edging closer. Fading Brexit fears also lent some modest support to the single currency.

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After much debate, the European Union is advancing closer to agreeing on a $60 a barrel oil price cap. Analysts believe that a price cap has long been coming and would go a long way in bringing the Ukraine war to an end. With western sanctions now in place, there are fears that Russia could simply cut gas supplies off from Europe. With a potential energy crisis looming, an oil price cap could continue to see the supplies flow without funding Putin’s war machine.

Elsewhere, speaking from a conference in Bangkok hosted by the Bank of Thailand, European Central Bank (ECB) President Christine Lagarde warned that both fiscal and monetary policies need to work in tandem. Lagarde also reassured investors that the ECB must work harder to rein in inflation:

‘What we central bankers have to do is deliver a monetary policy that anchors expectations... We need to signal to the public, to the observers, to the commentators, that in all scenarios, inflation will return to our medium-term target in a timely manner.’

GBP/EUR Exchange Rate Forecast: UK and Eurozone Services PMIs to Boost the Euro?



Looking ahead, the Pound Euro exchange rate will be left to trade on market sentiment as the curtain closes on another week’s trade. Looking ahead to next week and Monday will see a flurry of PMI releases from across the Euro area and the UK. With the service sector expected to remain in contraction territory across the board, any positive surprises could spur their respective currency.

Elsewhere, any progress with the EU and the proposed Russian oil price cap could inspire movement.

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