Euro Pound Exchange Rate Firms on Mounting UK Economic Concerns
The Euro Pound (EUR/GBP) exchange rate is strengthening modestly in the wake of Chancellor Jeremy Hunt’s comments on the Conservative party’s plans for economic growth. However, escalating Ukraine tensions could be keeping a lid on Euro gains.
At time of writing the EUR/GBP exchange rate is trading around £0.8798, a 0.27% from this morning’s opening levels.
Pound (GBP) Undermined by Growth Fears
The Pound is struggling against many of its peers this morning as Chancellor Jeremy Hunt attempted to restore confidence in the flagging UK economy. Mounting economic fears have been keeping a firm lid on Sterling.
However, the Pound fell on Hunt’s comments as he failed to restore confidence. Hunt points to the government’s plans for growth hinge on Brexit and are not hindered by it. And that Brexit has allowed the UK to ‘take advantage of the nimbleness and flexibility it makes possible.’ Hunt also commented that the best tax cut available to the UK is a cut to inflation.
Unfortunately, the markets did not react particularly positive on these comments and Sterling dipped on fears of economic stagnation in the UK.
Keeping the Pound moderately supported this morning, however, are elevated rate hike expectations. The Bank of England (BoE) are likely to continue raising interest rates at the next policy meeting next week, buoying GBP investors.
Euro (EUR) Firms Despite ECB Quiet Period and Ukraine Fears
Meanwhile, the Euro is enjoying moderate success despite mounting concerns over the conflict in Ukraine worsening. With the European Central Bank (ECB) now entering its media blackout before the interest rate decision next week, investors will have to look elsewhere for direction.
Since the west announced sending tanks to Kyiv, Russia has responded with increased attacks on Ukraine. Intensified conflict could be weighing on EUR investors’ minds this morning. The Kremlin said that sending tanks showed ‘direct involvement’ from the west. Nikolai Patrushev, secretary of Putin’s Security Council, commented on the move:
‘The course of the special military operation in Ukraine shows that the U.S. and NATO intend to continue making efforts to drag out this military conflict and have become its participants.’
Euro Pound Forecast: Interest Rate Week to Weigh on the Euro?
Looking ahead, the Euro Pound exchange rate could see wild fluctuations with a frantic week of market movements. Both the ECB and BoE will be announcing their interest rate decisions. In the meantime, GDP growth data for the Eurozone could be impactful.
As for the Pound, an expected 50bps rate hike is all but baked in, but with inflation remaining far too high and an economy still under intense pressure, Sterling could still struggle
