Pound Euro (GBP/EUR) Exchange Rate Continues Climbing as Russia-Ukraine Tensions Simmer
(Updated 16:00, 18/2/22) The Pound Euro (GBP/EUR) exchange rate strengthened through today’s session as the Russia-Ukraine crisis continues to pressure the Euro (EUR).
Leaders of the two Russian-backed separatist groups in eastern Ukraine – the Donetsk People’s Republic and the Luhansk People’s Republic – announced plans to evacuate citizens. They said the evacuation was due to fears of a Ukrainian attack.
Ukraine immediately refuted these allegations. The country’s Foreign Minister, Dmytro Kuleba, stressed that Ukraine is ‘fully committed to diplomatic conflict resolution only.’
Denis Pushilin, one of the Ukraine rebel leaders, said that he has agreed with Russian leadership that evacuees will be sheltered in the Rostov region of southwest Russia. Analysts believe that Russia’s involvement in the evacuation plans could potentially indicate that this is another escalation of the crisis.
Additionally, Eurozone consumer confidence unexpectedly fell from -8.5 to -8.8 in February. Although investors are focused on the Russia-Ukraine crisis at the moment, this could have added to the downward pressure on EUR.
Meanwhile, the Pound (GBP) continued to enjoy this morning’s strong retail sales data. However, economists warned that the cost-of-living crisis could mean there are tough months ahead for UK retailers. This may have limited Sterling’s gains.
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Pound Euro (GBP/EUR) Exchange Rate Rises on UK Retail Sales and EUR Weakness
The Pound Euro (GBP/EUR) exchange rate rose this morning after the UK’s retail sales data beat market forecasts.
Meanwhile, tensions between Russia and the West remain high amid reports of fresh attacks in eastern Ukraine.
Pound (GBP) Climbs on Strong Sales Data
The Pound (GBP) strengthened this morning following the UK’s latest upbeat retail sales data from the Office for National Statistics (ONS).
Sales increased by more than expected in January, rising by 1.9% versus the forecast 1%. This represents a recovery from December’s 4% slump in sales as the retail sector rebounded from Omicron disruption. In addition, retail sales were 3.6% higher than their pre-pandemic levels.
Darren Morgan, Director of Economic Statistics at the ONS, commented:
‘After a sluggish December where the Omicron wave had a significant impact, retail sales rebounded in January with their biggest monthly rise since the shops reopened last spring.’
The recovery in sales is supporting the Pound today, raising hopes that Omicron will not have significantly dented the UK economy.
Euro (EUR) Weak as Russia Tensions Continue
Meanwhile, the Euro (EUR) remains subdued as the tense standoff on the Russia-Ukraine border continues.
Today, Russia and Ukraine exchanged fresh accusations of violent provocation in eastern Ukraine. Russian-backed separatists and Ukrainian government forces are each pointing the finger at one another following further artillery fire this morning.
Western leaders believe the rebels are trying to provoke aggression from Ukraine. Russia could then use a retaliation as a pretext for war in a false-flag operation.
With tensions running high, EUR investors are understandably anxious. A Russian invasion would have a negative impact on the Eurozone economy, pushing energy prices higher and hurting European banks that have Russian debtors.
Pound Euro Exchange Rate Forecast: Crucial Few Days for Russia-Ukraine Crisis
The next few days could be crucial for the Russia-Ukraine crisis.
Today, US President Joe Biden will host a call with his Nato allies to discuss the situation. In addition, global leaders are meeting in Germany for the Munich Security Conference. Analysts the world over will be watching the outcomes of these events.
Vladimir Putin and Belarusian President Alexander Lukashenko will also meet today. The two men will decide what to do with the estimated 30,000 Russian troops currently in Belarus for joint military drills, which end on Saturday.
If the Russian troops remain in Belarus, or are redeployed close to the Ukrainian border, tensions would remain high.
In addition, Russia is planning to hold its annual strategic nuclear drills on Sunday – a few months earlier than usual. Putin will personally oversee the drills.
With all of these key events coming up, it’s possible that tensions could remain fraught or even escalate over the weekend.
Next week, however, US Secretary of State Antony Blinken will meet Russian Foreign Minister Sergei Lavrov. The meeting could revive hopes of a diplomatic solution after days of escalating tensions. If it goes well, the Euro may have a stronger week.