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Pound Euro Exchange Rate Rangebound as Putin Highlights Progress in Talks

Pound Coin on Euro Banknote GBP/EUR

Pound Euro (GBP/EUR) Exchange Rate Muted Despite Strong UK Growth

The Pound Euro (GBP/EUR) exchange rate is rangebound today. The Pound (GBP) has been bolstered after above-forecast GDP figures this morning. The Russian invasion of Ukraine is likely continuing to weigh on the Euro (EUR) meanwhile, as well as a downturn in German bond yields.  

At time of writing the GBP/EUR exchange rate is at around €1.1886, virtually unchanged from this morning’s figures.

Pound (GBP) Edges Higher after Strong GDP Figures

The Pound (GBP) is trending higher against many of its rivals today following better than expected GDP figures for January. Significant gains for Sterling are likely limited in the face of the Russia-Ukraine conflict however.

Figures from the Office for National Statistics (ONS) showed that GDP grew by 0.8% in January, its strongest monthly rise since June 2021. The figures came in above forecasts of 0.2%. All of the UK’s sectors showed strong growth following the impact of the Omicron wave in December.

Analysts have warned that growth could become stifled in the coming months amid market uncertainty.

Paul Dales, chief UK economist at Capital Economics, said:

‘The cost of living crisis and the influence of the war in Ukraine probably means this is as good as it gets for the year.’

Euro (EUR) Climbs as Putin Cites Positive Shifts in Diplomatic Talks

The Euro (EUR) is making gains against its riskier competitors today amid risk-off trading. The single currency is struggling to climb against its safer rivals. Claims from Russian President Vladimir Putin that there had been ‘positive shifts’ in diplomatic talks may have helped restore confidence in EUR.

Russian attacks on Ukrainian cities meanwhile have intensified in the past week. The city of Dnipro was the target of airstrikes for the first time on Friday. Explosions were also reported in the north western city of Lutsk as missiles struck an airfield.

Significant losses for the Euro, as well as gains against riskier currencies, are likely being prompted by an unexpectedly hawkish turn from the European Central Bank (ECB) on Thursday. The ECB announced that it would be ending its programme on monetary support in 2022.

Joerg Kraemer, Commerzbank’s chief economist, said:

‘Since the ECB now sees its inflation target effectively achieved, it is likely to raise its key interest rate twice this year, by 25 basis points each time.’

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