The Pound Euro exchange rate trended higher over the past week, with the pairing even briefly recapturing €1.20 as concerns over the war in Ukraine took their toll on the single currency. 

Euro undermined by Ukraine concerns 

The Euro was placed on the defensive through most of this week, with the currency being pressured by fresh concerns over the Ukraine crisis. 

As hopes for a negotiated end to the conflict continued to fade EUR investors grew increasingly concerns over its impact Eurozone economy. This was most notable at the start of the week amidst reports the EU might be mulling a ban on Russian oil. 

The Euro then attempted a comeback in the latter half of the week after the Eurozone’s latest PMI figures printed above expectations. But ongoing concerns over Ukraine as well as a stronger US dollar quickly reversed these gains. 

The Pound, meanwhile, opened the week on strong footing, didn’t appear to be any clear catalyst for this uptick, leading to suggestions it was prompted by a technical correction following last week’s post-Bank of England (BoE) plunge. 

Sterling then relinquished these gains in mid-week trade following the publication of the UK’s consumer price index, which reported domestic inflation soared to 6.2% in February and gave rise to fresh concerns over the UK’s cost-of-living crisis, particularly in the wake of a disappointing Spring Budget. 

GBP exchange rates then remained suppressed through the second half of the week in response to mixed PMIs and lacklustre retail sales figures. 

Eurozone Inflation Centre Stage 

Looking ahead, the most high impact data release of next week will undoubtedly be the Eurozone’s own consumer price index. 

Economists predict March’s preliminary CPI release to report inflation in the bloc climbed to a new record high as the war in Ukraine fanned global inflationary pressures. 

This could provide a boost to the Euro if the latest jump in inflation is seen as placing more pressure on the European Central Bank (ECB) to hike interest rates in 2022. 

The most notable GBP data release will be the UK’s latest GDP release. Will the final estimate for Q4 2021 surprise to the upside and help to boost the Pound? 

Meanwhile, the ongoing war in Ukraine is sure to continue to infuse volatility in the GBP/EUR exchange rate. Should Russia’s offensive continue to intensify then the Euro may be vulnerable to further losses. 

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