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GBP/EUR Exchange Rate to Strengthen amid Bleak European Outlook?

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GBP/EUR Exchange Rate to Strengthen amid Bleak European Outlook?

Pound Euro (GBP/EUR) Exchange Rate Strengthens amid Russia-Ukraine Worries

The Pound Euro (GBP/EUR) exchange rate strengthened this morning as worries around the Ukraine crisis weighed heavily on the single currency. 

At the time of writing the GBP/EUR exchange rate is trading at around €1.1443, which is roughly up 0.2% from this morning’s opening rate.

Euro (EUR) to Plumet Further as Putin Escalates Action?

The Euro (EUR) is down against most of its peers this morning as concerns over the Ukrainian war deepen.

Valdimar Putin announced the ‘partial mobilisation’ of Russian troops this morning, as separatists in occupied Ukrainian territories prepare to hold referendums this weekend on joining the Russian Federation

While announcing the partial mobilisation, Putin also made threats about the use of nuclear weapons.

This latest development signals a troubling escalation in the Russia-Ukraine conflict, dashing hopes of a faster-than-expected end to the war after Ukraine’s successful counteroffensive over the last two weeks.

The threat of escalating war has severely dented the Euro as investor concerns about the conflict deepen.

Looking ahead, it’s likely that the bleak geopolitical outlook will continue to weigh on the Euro.

Any further escalations in the conflict, such as intensified fighting or more bellicose rhetoric from the Kremlin, could see the Euro continue to drop.

Pound (GBP) to Strengthen Further following BoE Decision?

The Pound (GBP) is up against the Euro but down against most of its other peers today following worrying public sector borrowing figures. This is limiting GBP/EUR’s gains.

Public sector borrowing printed higher than expected in August as interest rates rise, causing debt repayments to become more expensive. The latest data revealed that borrowing had leapt to £11.8bn last month, far higher than the forecast £8.4bn.

GBP investors are increasingly concerned about the size and cost of UK’s deficit and the impact unaffordable debt could have on the country’s economy.

Looking ahead, these deficit concerns could cap the GBP/EUR exchange rate throughout the rest of today’s trade.

As we move into Thursday, the Pound could strengthen as the Bank of England’s (BoE) interest rate decision becomes the focus.

It’s expected that the BoE will hike rates by 75bps, which is in line with recent moves from other central banks. However, if policymakers are more conservative and raise rates by 50bps, then GBP could face headwinds.

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