Pound Euro (GBP/EUR) Exchange Rate Bounces off 13-Day Low
(Updated 14:20, 28/6/22) The Pound Euro (GBP/EUR) exchange rate dropped to a 13-day low this morning as Brexit worries and hawkish comments from European Central Bank (ECB) President Christine Lagarde saw GBP/EUR slip. However, the Pound Euro pair managed to rebound later on in the morning, recovering its losses.
The change in direction came as a rally in the US Dollar (USD) weighed on the Euro (EUR) due to EUR’s negative correlation to USD.
At the time of writing GBP/EUR is trading at around €1.1597, up from today’s low of €1.1567.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Dips amid UK-EU Trade War Worries
The Pound Euro (GBP/EUR) exchange rate headed lower this morning as GBP investors digested last night’s Northern Ireland Protocol Bill vote. The legislation passed to the second reading stage, despite warnings from the EU.
Meanwhile, comments from European Central Bank (ECB) President Christine Lagarde seem to be supporting the Euro (EUR).
Pound (GBP) Slips following Northern Ireland Vote
The Pound (GBP) stumbled as today’s European trade began following the Northern Ireland Protocol Bill debate last night.
MPs voted 295 to 221 in favour of the bill, which will now face further scrutiny in the House of Commons. While there are many obstacles to clear before the bill becomes legislation – most notably in the House of Lords – the successful vote brings the UK one step closer to scrapping parts of the Northern Ireland protocol.
Some fear that such a move would spark a trade war with the EU. The bloc considers the move a breach of the legally binding Trade and Cooperation Agreement (TCA) and has warned that it will retaliate.
These concerns seem to be weighing on Sterling this morning.
Euro (EUR) Firms amid ECB Lagarde Speech
Meanwhile, the Euro is enjoying some hawkish comments from ECB President Christine Lagarde.
Lagarde has confirmed the bank’s intention to raise interest rates by 25 basis points in July, while signalling that a steeper rate rise is possible in September.
The ECB chief also said that the bank will embark on a ‘gradual but sustained’ path of rate hikes beyond September.
#BREAKING ECB to go 'as far as necessary' to hit 2% inflation target 'over the medium term': president Lagarde pic.twitter.com/ddKzQpdzdA
— AFP News Agency (@AFP) June 28, 2022
EUR investors seem to be cheering these comments, which indicate that the ECB could raise rates faster and further than initially expected. However, at the time of writing the upside seems surprisingly muted.
Pound Euro Exchange Rate Forecast: GBP/EUR to Fall Further?
As today’s session unfolds, the Pound Euro pair could slip lower.
Sterling faces some other headwinds today. Following rail strikes last week, and criminal barrister strikes this week, Royal Mail staff are now voting on whether to take industrial action.
With inflation at a 40-year high, workers are demanding pay increases to help with the rising cost of living. There are concerns that further strikes will cause economic disruption at a fragile time for the UK. In addition, the flurry of union activity is a sign of deeper social and political unrest in the country.
At the same time, Scottish Fist Minister Nicola Sturgeon is pushing for a second independence referendum. Sturgeon argues that Scotland wanted to stay in the EU.
Will these indications of economic and political instability in the UK rattle GBP investors?