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Pound Euro Exchange Rate Muted as Invasion of Ukraine Continues

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Pound Euro (GBP/EUR) Exchange Rate under Pressure as Russian Forces Advance

The Pound Euro (GBP/EUR) exchange rate is subdued today. The Russian invasion of Ukraine continues to weigh on both currencies. Reports indicate that fighting has intensified around key Ukrainian cities.

At time of writing the GBP/EUR exchange rate is at around €1.2064, virtually unchanged from this morning’s figures.

Euro (EUR) Falls as Russia Reports Capture of Kherson

The Euro (EUR) is falling against its competitors today. The Russian invasion of Ukraine has continued to dent confidence in the single currency. Significant losses for EUR may be underpinned by rising German bond yields however.

Russian forces have continued to push further into Ukraine with reports that troops have captured the city of Kherson. Further peace talks between the two countries on Thursday may restore some demand for the Euro should they be productive.

An uptick in German and Eurozone February PMIs may also help prevent drastic losses for the Euro today. Activity in Germany’s services sector grew to 55.8 whilst Eurozone services activity rose to 55.5.

Whilst the figures indicated a strong post-Covid recovery for the Eurozone, both PMIs came in below forecasts. Inflationary pressures have continued to contribute to rising business costs.

Pound (GBP) Dips Despite Strong February Services PMI

The Pound (GBP) continues to dip against many of its rivals today amid a retreat in global risk appetite. A dovish change in tone from the Bank of England (BoE) is also likely to have placed pressure on Sterling.

BoE policymakers have sought to reign in expectations of future aggressive rate hikes in the face of market uncertainty. According to ING analysts, markets are now anticipating the central bank to raise rates to 1.5% by the end of 2022. This is down from the previously anticipated 2.25%.

Significant losses for the Pound may be limited following positive February PMI figures however. The index indicated service sector activity in the UK rose to 60.5 from 54.1 in January. Whilst this was below forecasts of 60.8, the figures still represent an eight-month high and a strong recovery following the Omicron wave.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, was quick to warn that the Russia-Ukraine conflict may hamper future sector growth :

‘With the evolving geopolitical situation, companies may struggle to keep on top of this momentum.’

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