Pound Euro (GBP/EUR) Exchange Rate Hits Eight-Day High as EU Proposes Fifth Round of Russia Sanctions
(Updated 16:15, 5/4/22) The Pound Euro (GBP/EUR) exchange rate has extended its upside today as the EU proposed a new set of sanctions.
The fifth round of restrictive measures comes after evidence of Russian war crimes emerged over the weekend. In the town of Bucha, Ukraine, Russian soldiers seem to have deliberately targeted Ukrainian civilians. Western leaders believe the disturbing attacks were authorised by senior Russian officials.
US Secretary of State Antony Blinken said:
‘What we’ve seen in Bucha is not the random act of a rogue unit. It’s a deliberate campaign to kill, to torture, to rape, to commit atrocities. The reports are more than credible. The evidence is there for the world to see.
Ukrainian President Volodymyr Zelenskiy has said the mass killings of civilians in Ukraine amounts to ‘genocide’.
In response to the horrifying revelations, European Commission President, Ursula von der Leyen, announced that the EU is seeking to impose further sanctions against Russia, including an import ban on coal.
While the sanctions target Russia, they’ll also hamper economic growth in the Eurozone. As a result, the Euro (EUR) has faced selling pressure today.
At the time of writing, the Pound Euro pair is trading at an eight-day high, just above €1.20.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Firms amid Ukraine News and Final PMIs
The Pound Euro (GBP/EUR) exchange rate wavered higher this morning as reports of new sanctions following horrifying developments in Ukraine put pressure on both currencies.
Sterling has managed to gain against the single currency overall, however. This is in part due to an ‘exceptionally strong’ services PMI.
Euro (EUR) Slips amid Grim News from Ukraine
The Euro (EUR) is struggling today as the mood around the Russia-Ukraine war remains grim.
Harrowing images and stories are emerging from many of the satellite towns around Kyiv that were, until recently, under Russian occupation.
In the town of Bucha, Ukrainian forces found evidence of the torture and murder of hundreds of civilians. Analysts fear that Russian soldiers may have committed similar atrocities in other towns and cities across the country. Ukrainian President Volodymyr Zelenskiy has accused the invading army of committing ‘genocide’ against the Ukrainian people.
The revelations come after last week’s peace talks showed some progress. Now, negotiations between the two sides will be more difficult than ever.
In response, the EU is reportedly preparing another round of sanctions, which could be announced tomorrow.
The Euro is closely correlated with events in Ukraine as the Eurozone economy is highly exposed to the fallout from sanctions and souring trade relations with Russia.
The horrific news out of Bucha has dented the possibility of peace while likely increasing the duration and intensity of economic sanctions. As a result, EUR is under significant selling pressure.
Pound (GBP) Inches Higher after PMI Beats Forecasts
Meanwhile, the latest updates from Ukraine are also hurting the Pound (GBP). However, Sterling is less vulnerable to the Ukraine crisis than the Euro is, and so GBP/EUR is wavering higher.
In addition, an upwardly revised final UK services PMI is providing the Pound with some support. The PMI printed at 62.6, up from 60.5 and above the flash result of 61.
Tim Moore, Economics Director at S&P Global – the company that compiles the PMI survey – commented:
‘UK economic growth continued to surge higher in March after an Omicron-induced slowdown at the turn of the year. Service sector companies led the way as business activity expanded at the fastest pace since the post-lockdown recovery seen last May.’
Yet despite the strong growth, business optimism slipped to a 17-month low. This may be limiting the PMI’s upside effect on the Pound.
Pound Euro Exchange Rate Forecast: New Sanctions to Push the Euro Lower?
News from the Russia-Ukraine war could continue to dominate GBP/EUR for the remainder of the session. If the EU does confirm new sanctions, this could hurt the Euro, although the scale of the sanctions will determine the impact.
Looking further ahead, Germany’s latest factory orders data could affect EUR. Economists expect a 0.2% contraction, which could put further pressure on the single currency.
Meanwhile, a handful of speeches from European Central Bank (ECB) policymakers could also drive some movement in the Euro.