The Pound Euro exchange rate trended higher over the past week, mostly as a result of the single currency being undermined by renewed concerns over the war in Ukraine.
Euro stumbles as Ukraine peace process in doubt
The Euro got off to a poor start this week, following reports of alleged atrocities committed by Russian troops in areas from which they had withdrawn around Kyiv.
This sparked fresh doubts over peace talks, with Ukraine President Volodymyr Zelensky suggesting negotiations would be difficult now the country is aware of the scale of the atrocities.
Concerns over a prolonged conflict, in addition to the imposing of more sanctions on Russia from the EU weighed on the single currency amidst fears over the potential impact on the Eurozone economy.
The Euro briefly bounced back after the minutes from the European Central Bank’s March policy meeting proved more hawkish than expected, before quickly resuming its downtrend amidst a pick up in the US Dollar.
At the same time, while it was able to climb against a weakened Euro, the Pound struggled to replicate this success elsewhere, with the currency flip-flopping as it was undermined by cost-of-living concerns but bolstered by an upwardly revised services PMI and a market correction in the latter half of the week.
ECB rate decision in the spotlight
Looking ahead, the spotlight next week will undoubtedly be on the ECB’s latest interest rate decision.
In light of the minutes for March’s meeting EUR investors will be eager to see if the bank adopts a more hawkish outlook this month, with the Euro poised to rally if the bank appears more open to raising interest rates this year.
In the meantime, the publication of Germany’s latest ZEW economic sentiment index could act as a headwind for the Euro if sentiment continued to deteriorate this month.
For GBP investors, the UK’s consumer price index could thrust the country’s rising cost of living to the forefront once again. If inflation continues to accelerate rapidly it could rattle the Pound.
In addition to the wealth of data set for release next week, the GBP/EUR exchange rate is also likely to continue to be influenced by developments in Ukraine, with the pairing likely to remain unsettled if peace talks remain at an impasse.
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