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GBP/EUR Exchange Rate Directionless as US Dollar Surges

Pound Euro Exchange Rate Rangebound amid USD Strength

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range during today’s session as a stronger US Dollar (USD) limits demand for the single currency.

At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.2000, with minimal market movement.

Euro (EUR) Trading Flat Following Hawkish Fed Comments

The Euro (EUR) is mixed against the Pound (GBP) during today’s session in response to a stronger US Dollar weighing on EUR due to the negative correlation between the pairing.

This upswing in the US Dollar comes in the wake of the Federal Reserve’s latest policy meeting, in which Fed Chair Jerome Powell struck a notable hawkish tone.

 Powell hinted the Fed could hike rates more aggressively than previously thought this year telling reporters that there is ‘quite a bit of room to raise interest rates’.

As the Fed signals a tougher line of attack against rising inflation, the policy divergence between it and the European Central Bank (ECB) is only growing starker.

Yeap Jun Rong, market strategist at IG, said:

‘With the somewhat hawkish signals by the Fed … there may be greater pressure for central banks to act on curbing inflationary pressures as well.’

Elsewhere, German GfK consumer confidence for February has unexpectedly improved.

Instead of falling to the forecast -7.8, the index marginally increased from -6.9 to -6.7.

This is the first improvement in three months, and is largely due to the easing of pandemic restrictions which has boosted new hopes with regards to inflation, capping the Euro’s losses against the Pound. 

Pound (GBP) Subdued as UK Political Landscape Remains Uncertain

Meanwhile, the Pound (GBP) is muted against the Euro (EUR) this morning as investors await the publication of Sue Gray’s report.

The report was ordered to investigate the ‘partygate’ scandal concerning the actions of Boris Johnson, the UK Prime Minister, during the 2020 lockdown.

Although the report’s publication is expected imminently, it is not yet known when it will be available.

This leaves the UK political landscape unsettled as many MP’s – Conservative and opposition – demand for Johnson’s resignation.

However, Johnson has thus far refused these requests and maintains the position that he ‘welcomes’ both the report and the newly-initiated investigation by the Met Police as to ‘give the public the clarity it needs’. As the UK’s political uncertainty prevails, it is likely to continue to dampen the Pound’s pot