Pound Euro exchange rate rocked by concerns over Russian ‘gas blackmail’

The Pound Euro exchange rate traded erratically over the past week as markets were unsettled by the potential disruption of European energy supplies. 

GBP/EUR fluctuates amid energy concerns, UK economic concerns 

The Euro initially firmed this week as Emmanuel Macron’s victory in the French election before quickly succumbing to its negative correlation with the US dollar as the latter surged. 

The US dollar’s bullish run remained a thorn in the side of the Euro throughout the week. 

The Euro attracted some short-lived support following comments from European Central Bank (ECB) policymaker Martins Kazaks, in which he expressed his support for a July interest rate hike, but these quickly evaporated in the face of Russia’s move to halt gas exports to Poland and Bulgaria. 

This sparked concerns over the Eurozone’s energy security as the Kremlin warned other ‘unfriendly countries’ could be cut off. 

The end of the week then saw the publication of the Eurozone’s consumer price index, which despite reporting inflation in the bloc climbed to a new record high, was unable to offset a weaker-than-expected Eurozone GDP print. 

Meanwhile the Pound also struggled to find direction this week, with Sterling sentiment suffering as investors reined in their Bank of England (BoE) rate hike bets. 

Infusing further volatility into GBP exchange rates were concerns over the UK’s economic trajectory, in the wake of reports UK insolvencies have risen to a ten-year high. 

All eyes on the BoE next week 

Turning to the start of next week’s, the spotlight will undoubtedly be on the Bank of England’s latest interest rate decision. 

The general consensus is the BoE will deliver its fourth consecutive interest rate hike when it concludes its May policy meeting on Thursday. With the hike largely priced in the focus will be on the bank’s forward guidance. 

There are considerable doubts the bank will pursue further rate hikes over the summer, any confirmation of which is likely to weigh on Sterling. 

Of course, given the BoE’s reputation for being an ‘unreliable boyfriend’ there remains a risk the bank could stay its hand next week, in a move which would have disastrous consequences for the Pound. 

Meanwhile, heightened tensions between the EU and Russia may drag on the Euro next week. 

If you’ve got a GBP/EUR currency transfer to arrange, the team at TorFX are on hand to help. Get started now to access bank-beating exchange rates and fast, free transfers.  

* This article has been written by a third party not owned or controlled by Spanish Property Insight (SPI).
SPI disclaims any responsibility or liability related to your access to or use of any third party content.