Pound Euro (GBP/EUR) Exchange Rate Rebounds as Russia-Ukraine Worries Continue
(Updated 16:15, 27/1/23) The Pound Euro (GBP/EUR) exchange rate rebounded this afternoon, recouping earlier losses, as ongoing fears of an escalation in the Russia-Ukraine conflict eventually dragged the Euro (EUR) back down.
Since Western allies agreed to send tanks to Ukraine, markets have been fearful of a retaliatory response from Russia. The Kremlin indeed responded with aggressive rhetoric, before launching fresh waves of missiles at civilian targets in Ukraine. With Russian shelling intensifying, the single currency slipped back.
However, the Pound (GBP) was unable to post any notable gains as the UK’s bleak economic outlook continued to weigh on Sterling sentiment.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Drops as UK Outlook Remains Bleak
The Pound Euro (GBP/EUR) exchange rate has wavered lower today as concerns about the UK economy continued to plague the Pound (GBP). Meanwhile, markets are paying close attention to a speech from UK Chancellor Jeremy Hunt.
At the time of writing, GBP/EUR is trading at around €1.1365, a 0.3% drop from its overnight high of €1.1398.
Pound (GBP) Falls as Economic Woes Intensify
The Pound is on the back foot this morning, as the UK’s economic outlook remains bleak.
Following on from yesterday’s troubling data from the Confederation of British Industry (CBI), today’s headlines remain downbeat.
There are reports that the government’s HS2 high-speed rail link between London and Manchester continues to massively exceed its budget, meaning parts of the project may be abandoned. The expected cost of the project has ballooned to £160bn, more than triple the original budget of £55.7bn back in 2015.
While the cost has rocketed, the project itself has become smaller in ambition. The Leeds leg of the rail line was cancelled, and now there are reports that the line may not run through to central London as was originally planned.
The latest news adds to multiple concerns about the state of the UK economy, its infrastructure, and the public purse.
At the time of writing, Chancellor Jeremy Hunt is delivering a speech on his plans for growth, which will likely impact the Pound throughout the day.
Euro (EUR) Firms despite Russia-Ukraine Worries
Meanwhile, the Euro (EUR) is finding gains against a weakening Pound, despite worries about the Russia-Ukraine war.
Since Germany and other Western allies agreed to send battle tanks to Ukraine, EUR investors have grown increasingly fearful of another escalation in the conflict.
While this has weighed on the single currency in recent days, today EUR investors seem a little more upbeat. The Euro is managing to strengthen against many of its peers.
Pound Euro Exchange Rate Forecast: Lagarde and Hunt in Focus
Later this morning, European Central Bank (ECB) President Christine Lagarde is due to speak. Recently, markets have found it hard to predict what the ECB will do at its February meeting, which takes place Thursday next week.
Policymakers have been signalling further multiple 50bps interest rate rises. However, Eurozone inflation is cooling rapidly and there have been rumours that the bank is considering a slower pace of policy tightening after next week’s expected hike.
Therefore, investors may be especially sensitive to Lagarde’s comments. If she insists that the ECB will ‘stay the course’ and deliver further aggressive rate rises, the Euro could strengthen. Any hint that the bank could be considering a softer approach will likely dent the common currency.
Turning to the Pound, GBP investors will likely focus on UK Chancellor Jeremy Hunt’s plan for boosting growth. This morning Hunt delivered a speech outlining his vision for UK long-term growth and investment, amid criticism that the Chancellor’s Autumn Statement – which included spending cuts and tax rises – will not help to boost UK economic growth.
It may take some time for markets, analysts and industry figures to digest Hunt’s speech. If they react favourably to his plans, Sterling could strengthen.