The Pound Euro exchange rate tumbled this week, with the pairing briefly striking a three-month low before rebounding in the latter half of the week
Euro fluctuates on Ukraine peace talk process
The Euro stormed higher in the first half of this week, following ‘constructive’ peace talks between Ukraine and Russia.
Investors seized on Russia’s claim it would scale back ‘military activity’ around Kyiv and Chernihiv, seeing it as the first step towards a negotiated end to the conflict.
The Euro was able to maintain this positive trajectory through the middle of the week, but then began to give ground in the second half of the session as investors started to raise doubts over the peace process as Russia continue to shell targets in Kyiv and Chernihiv.
EUR investors were also spooked by Vladmir Putin’s threat to stop gas exports to ‘unfriendly countries’ who are unwilling to pay in roubles, amidst concern it could disrupt European energy supplies.
The Euro was the left subdued at the end of the week, in spite of Eurozone inflation smashing expectations by rocketing up by 7.5% in March.
At the same time, while the Pound also benefitted from the apparent breakthrough in peace talks, as the UK isn’t as sensitive to the situation as the Eurozone, it lost out against the Euro.
However, Sterling was able to recoup some ground in the latter half of the week, after the UK’s latest GDP figures printed above expectations.
Ukraine conflict to remain centre stage
Looking ahead, it’s likely the situation in Ukraine will continue to act as a key catalyst of movement in the GBP/EUR exchange rate.
This could infuse fresh volatility in the pairing depending on whether there is any further progress in peace talks and whether or not Putin follows through with his threat to cut off European gas supplies.
Also in the spotlight for EUR investors will be Germany’s latest industrial data. Another acceleration of factory orders and industrial production in February could reflect positively on the euro.
On the other hand, with GBP data thin on the ground next week, the Pound could struggle to attract support, particularly in light of ongoing cost-of-living concerns.
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