Pound Euro (GBP/EUR) Exchange Rate Rises amid Market Optimism
(Updated 16:00, 15/3/22) The Pound Euro (GBP/EUR) exchange rate bounced off a one-month low earlier today and is now up from this morning’s opening levels.
The upside came amid a recovery in risk appetite, as reflected in the European equity markets. Following a sharp dip earlier this morning, both the European STOXX 600 and the FTSE 100 have managed to recover.
The upbeat mood comes as markets hold out hopes for a diplomatic resolution to the Russia-Ukraine crisis. Peace talks have continued today, while some civilians in the besieged city of Mariupol were finally able to evacuate.
This optimism would usually support the single currency as well as the Pound (GBP). However, Germany’s dire ZEW economic sentiment index from this morning has weighed on EUR throughout the session.
At the time of writing, GBP/EUR is trading at around €1.191, up almost 0.3% from the start of the European session.
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Pound Euro (GBP/EUR) Exchange Rate Bounces off One-Month Low
The Pound Euro (GBP/EUR) exchange rate fluctuated this morning after the UK and the Eurozone published some worrying economic reports.
After slumping to a one-month low earlier, GBP/EUR is currently trading at around €1.188, marginally up from today’s opening levels.
Pound (GBP) Falls on Worrying Jobs Data
The Pound (GBP) stumbled as today’s trade began following some disappointing UK jobs data.
Although the UK’s unemployment rate fell more than expected – dropping from 4.1% to 3.9% – this was partly driven by a rise in economic inactivity.
Tony Wilson, Director of the Institute for Employment Studies, explains:
‘People shouldn’t be fooled by the fall in headline unemployment in today’s figures. Unemployment is falling because people are leaving the labour force at a worryingly high rate, with one hundred thousand fewer in the labour market than just three months ago…
‘This is the largest fall since comparable records began thirty years ago, and… is happening in spite of continued record vacancies, and the tightest jobs market for employers in at least fifty years.’
Despite the unemployment rate falling, total employment remains well below its pre-pandemic level.
In addition, the latest wage data shows that real income, adjusted for inflation, fell by 1% year on year in the three months to January. This is the biggest fall in real pay in over seven years.
This data shows that the UK’s cost-of-living squeeze is tightening, with further price pressures expected in the coming months.
Following the report, the Pound Euro pair dropped to a one-month low. However, it has since bounced back after the Eurozone published some troubling data of its own.
Euro (EUR) Sheds Gains as German Investor Morale Plunges
The Euro (EUR) initially firmed against the weakening Pound as investors are holding out hope for a diplomatic resolution to the Russia-Ukraine war.
Although Russia’s invasion continues, civilian evacuations and diplomatic efforts have increased in recent days, which has cheered EUR investors.
Peace talks are set to continue today, after Ukrainian President Volodymr Zelenskiy said that yesterday’s negotiations went ‘pretty good’.
However, a record slump in German investor morale has dented the Euro. The ZEW economic sentiment index for Europe’s largest economy plunged from 54.3 to -39.3, far worse than forecasts of 10. The nosedive in confidence comes as the Russia-Ukraine war pushes the German economy towards recession.
Following the ZEW report, EUR has relinquished its gains and is slightly down against GBP.
Pound Euro Exchange Rate Forecast: ECB Lagarde in Focus
Later this afternoon, European Central Bank (ECB) President Christine Lagarde is due to speak. The ECB recently surprised markets by accelerating its tapering of asset purchases. However, dovish comments about when the bank is likely to hike rates have weighed on EUR. Investors will be analysing Lagarde’s comments to try and determine the future of the ECB’s monetary policy.
The Russia-Ukraine war will also continue to drive movement in both GBP and EUR. If the cautious optimism continues, we could see the single currency firm against Sterling.