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GBP/EUR Exchange Rate to Remain Volatile amid UK Political Volatility?

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GBP/EUR Exchange Rate to Fall Further as UK Political Turmoil Continues?

The Pound Euro (GBP/EUR) exchange rate is sliding today amid growing doubts over the future of Liz Truss’s premiership.  

At the time of writing the GBP/EUR exchange rate is trading at around €1.1475, which is roughly down 0.4% from this morning’s opening rate.

Pound (GBP) to Witness more Volatility as Truss’s Future in Doubt?

The Pound (GBP) is on the defensive this morning, spurred by questions over the future of Prime Minister Liz Truss.

Yesterday, the Truss’s new Chancellor Jeremy Hunt scrapped the majority of the controversial mini-budget which had been the centre of Pound volatility over the last month.

The Pound firmed in response but has since fallen as investors are left questioning how long Truss will be able to remain in office, amid plummeting polls and growing concerns over her credibility.

Looking ahead, GBP investors will turn their attention to the inflation data release tomorrow. Headline inflation is expected to rise from 9.9% to 10%. Core inflation is expected to rise from 6.3% to 6.4%.

If the data prints as expected, then the Pound could face further volatility as GBP investors start to bet on interest rate hikes from the Bank of England.

Euro (EUR) to Stay Muted as Data Fails to Offset War Escalation?

The Euro (EUR) is also struggling today, despite Germany’s economic sentiment coming in better than expected.

The data printed a rise from -61.9 to -59.2, which gave the Euro a small boost. However, sentiment in the Eurozone’s largest economy remains bleak, so the surprise print is being offset by distressing headlines concerning Ukraine.

Missile strikes continue across Ukraine and the destruction of a reported 30% of the country’s power infrastructure are causing countrywide blackouts. If Russia’s attacks continue at their current pace, then the Euro will likely continue to struggle for support.

Later today a speech from European Central Bank (ECB) policymaker Isobel Schnabel could limit some of the Euro’s losses. If she strikes a hawkish tone, then this could cheer investors and set the stage for tomorrow’s impactful data. 

Looking ahead, Eurozone inflation data is also expected tomorrow. September’s finalised figures are expected to confirm inflation jumped from 9.1% to 10%. Potentially lending some support to the Euro.

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