This morning ECB President Lagarde warned that the Eurozone ‘could see a more prolonged cost-push shock coming from wage growth’.” GBP/EUR forecast for 2023 and beyond ECB speakers have made it very clear that they remain concerned about underlying inflation pressures. “If policymakers on both sides of the Atlantic can convince investors that the financial system is sound, then it follows that they will have more scope to focus on price pressures. Yet as explained by Rabobank’s Jane Foley: The current ECB rhetoric is that the banking sector is strong, aimed at restoring market sentiment. The banking fallout triggered by the collapse of the US-based Silicon Valley Bank that saw troubled Credit Suisse being taken over by rival UBS has hurt investors’ confidence in the Eurozone, hitting the European currency and the block’s banking stocks. The great debate between inflation and disinflation, and the risks of overtightening versus under tightening, remains unresolved.” Banking turmoil But this needs to be set against the rise in food and core prices in today's print. (Though the real impact may not be so big, with the end of the government's £66/month subsidy, that is not accounted for in inflation). “There are some additional disinflationary risks including a further fall in oil prices in recent days and an update from Cornwall Insight, suggesting that the Ofgem price cap could fall to £2,013 in July - a 19.5% fall from the current average annual household bill of £2,500. INFOGRAPHICS: PLEASE REDESIGN THE CHART BELOW, without today’s price Since the start of the year, the pair has been trading between 1.11 and 1.14 for the first three months of 2023. Since then the British pound recovered some losses, yet moved lower in 2023. ![]() The pair struggled through high volatility throughout August and September 2022, dropping to an intraday low of €1.08 on 26 September following a disastrous mini-budget of the Liz Truss government. ![]() But the pair began to slide in April and dropped to 1.16 on 26 June 2022. The GBP/EUR pair briefly moved back above 1.21 in late February 2022 as traders weighed the impact of the Russian invasion of Ukraine on the eurozone economy, anticipating a stronger impact than on the UK economy. The GBP/EUR pair moved above 1.19 in January 2022, after the Bank of England ( BoE) kicked off a series of interest rate hikes in December 2021 with a 15-basis point increase to 0.25%. The pair dipped to 1.1474 in April 2021 but then moved into a trading range between 1.16 and 1.18 for the rest of the year. ![]() The upward trend continued into 2021, with the pair reaching 1.1761 in late March. The pair then began to trend higher as the introduction of Covid-19 vaccines raised hopes that the UK economy would start to recover from lockdowns. The rate quickly moved up to 1.1495 in April 2020, but then trended lower over the summer to return to the 1.08 level in September 2020. Try demo GBP/EUR trend reflects economic volatilityĪfter falling in March 2020 from 1.20 to 1.08 on concerns about the impact of the Covid-19 pandemic on the UK economy, the GBP/EUR pair has remained volatile. More recently, concerns over the impact of the Russia-Ukraine war on inflation in the UK and the eurozone have influenced the direction of the exchange rate. The uncertainty surrounding negotiations between the UK and the EU over the UK’s exit from the bloc have weighed on the value of sterling since the 2016 referendum. Market sentiment is a key driver for the GBP/EUR pair. ![]() These economic readings are key in shaping a GBP/EUR forecast. Macroeconomic indicators, including GDP, inflation, interest rates, services and manufacturing activity and unemployment, market sentiment and consumer confidence, all drive the currency markets, as they affect a country’s attractiveness to investors and, in turn, demand for its currency. Both the GBP and EUR represent major global financial and trading centres. Sterling is the former global reserve currency and one of the strongest in the world, while the euro is the second most traded currency in the world after the US dollar (USD). The pair is one of the most frequently traded on the FX markets. The GBP/EUR pair represents how many euros – the quote currency – are needed to buy one British pound – the base currency.
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