Pound Euro (GBP/EUR) Exchange Rate Rises as EUR Remains Offered
The Pound Euro (GBP/EUR) exchange rate jumped higher today, as strength in the US Dollar (USD) put pressure on the single currency.
With no notable data out of the UK or the Eurozone for the rest of the week, both currencies will likely trade on domestic economic news and updates from Ukraine.
Pound (GBP) Rises despite Headwinds
The Pound (GBP) has firmed today, showing surprising resilience despite multiple headwinds buffeting the currency.
A generally risk-averse market mood and the UK’s cost-of-living crisis both present serious challenges for Sterling. Nevertheless, GBP is gaining ground.
One factor that continues to underpin the Pound is the Bank of England’s (BoE) monetary policy. The bank has hiked interest rates for three consecutive meetings, putting it well ahead of most of its global counterparts. The European Central Bank (ECB), on the other hand, still seems a way off from hiking rates.
While BoE policymakers have become more dovish in recent weeks, investors may now see that as the correct course of action considering the risks to the UK economy.
For the rest of today’s session, a lack of UK data may leave GBP to trade on risk sentiment and domestic economic news.
A new release from the Office for National Statistics (ONS) shows that businesses are increasingly worried about rising inflation and commodities prices.
Meanwhile, the UK income crunch has hit the headlines in recent days and likely remains in investors’ minds. This could limit the Pound Euro exchange rate’s gains today.
Euro (EUR) Downside Cushioned by Retail Sales
The Euro (EUR), on the other hand, is struggling. Renewed strength in the US Dollar is weighing on EUR, due to the currencies’ negative correlation. In addition, a downbeat mood around the Ukraine crisis continues to keep EUR on the defensive.
Mixed retail sales data from the Eurozone gave the single currency a modest boost. Monthly sales rose by 0.3%, though this was below forecasts of a 0.6% rise. Year-on-year, however, retail sales growth beat expectations.
As today’s session progresses, USD movement and the Ukraine crisis may dominate EUR exchange rates. Relations have soured since evidence of intentional civilian massacres emerged, leading to new EU, US and UK sanctions on Russia. If the outlook remains grim, or if there are new escalations, EUR could fall further.
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