Pound Euro (GBP/EUR) Exchange Rate Trades Narrowly as Russia-Ukraine Conflict Intensifies
(Updated 16:45 29/12/22)
The Pound Euro (GBP/EUR) exchange continued to trade within a narrow range today. A risk-on impulse did little to improve the currency pair’s prospects.
A weaker US Dollar (USD) also prevented upward movement for GBP/EUR following the latest US jobless claims data.
On the other hand, the Russia-Ukraine conflict continued to keep the exchange rate trending sideways. Russia launched one of its largest-ever missile attacks against multiple sites in Ukraine.
At time of writing the GBP/EUR exchange rate was at around €1.1308, virtually unchanged from this morning’s opening figures.
Original article continues below
Pound Euro (GBP/EUR) Exchange Rate Trends Sideways Despite Risk-Off Mood
The Pound Euro (GBP/EUR) exchange rate is trading within a narrow range today. A risk-off market mood could be preventing the currency pair from climbing any higher. Hawkish rhetoric from the European Central Bank (ECB) and the UK’s cost-of-living crisis could also be weighing on GBP/EUR.
On the other hand, the exchange rate may be finding support from optimistic UK retail sales data.
At time of writing the GBP/EUR exchange rate is at around €1.1312, virtually unchanged from this morning’s opening figures.
Pound (GBP) Bolstered by Promising Signs from Retail Sector
The Pound (GBP) is firming today. Promising signs from the UK’s retail sector could be pushing Sterling higher.
Data collected by retail data analysts Springboard indicated a sharp uptick in footfall on Boxing Day (26 Dec) and 27 December. Sector analysts had previously predicted a slower sales period amid the UK’s cost-of-living crisis.
Diane Wehrle, Insights Director at Springboard, said:
‘The +36.6% increase in footfall from Boxing Day to 27 December suggests that consumers remain keen to shop for sale bargains post-Christmas. Increased inflation may act as an incentive for many shoppers who are keen to secure purchases ahead of any further price rises.’
The recovery in the sector could be short lived however, with higher costs set to further dent household spending in 2023. A survey conducted by accountancy firm KPMG found that roughly 61% of UK consumers were planning to reduce their non-essential spending. This outlook could be capping gains for the Pound today.
Euro (EUR) Gains amid Risk Appetite Pullback
The Euro is edging higher against many of its peers today. A pullback in global risk appetite is likely underpinning the single currency.
EUR may be seeing its gains limited against rivals like the Pound by further developments in the Russia-Ukraine war, however. Speaking earlier today, Russian Foreign Minister Sergei Lavrov rejected the latest calls for peace talks. This may be adding to fears of a protracted conflict and denting confidence in the Euro today.
Additionally, Ukrainian officials reported a series of large-scale missile attacks by Russian forces across the country today.
On the other hand, consistently hawkish signals from European Central Bank officials may be underpinning the Euro today. Multiple ECB policymakers have spoken in favour of further interest rate hikes this week.
GBP/EUR Exchange Rate Forecast: Will UK Strikes Continue to Dent Pound?
The Pound will see no significant data over the rest of the week. Continued industrial action in the UK could keep pressure on Sterling if no meaningful resolutions are reached.
The UK’s poor outlook could also weigh on the Pound over the rest of the week. After the downward revision in third quarter GDP figures last week, fears of a deeper-than-forecast recession could dent confidence in Sterling.
Market bets on the BoE’s forward path could also drive movement in the Pound.
The Euro will also trade without any major data releases over the rest of the week. Further escalations in the Russia-Ukraine war could keep the single currency on the defensive.
On the other hand, EUR could find support from further hawkish comments by ECB policymakers this week.