Pound Euro Exchange Rate News: GBP/EUR Slumps amid UK Political Drama

October 14, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Slumps amid UK Political Drama

GBP/EUR Exchange Rate Falls amid UK Political Jitters

The Pound to Euro (GBP/EUR) exchange rate tumbled on Friday amid UK political uncertainty.

At time of writing the GBP/EUR exchange rate traded at around €1.1485, which was down roughly 0.7% from Friday’s opening levels.

Pound (GBP) Drops amid Truss’s Lacklustre Address

The Pound (GBP) was meet by notable selling pressure on Friday following some UK political drama.

This saw Chancellor Kwasi Kwarteng forced to fall on his sword for delivering the much-criticism mini-budget.

The announcement he would be replaced by Jeremy Hunt temporarily capped Sterling’s losses.

Speaking about Hunt on Friday Truss said:

‘He shares my convictions and ambitions for our country. He will deliver the medium-term fiscal plan at the end of this month. He will see through the support we are providing to help families and businesses, including our energy price guarantee.’

However, this did little to soothe investors and Sterling’s selloff resumed following a press conference by Prime Minister Liz Truss.

While the PM announced a U-turn on her plans to freeze corporation tax at 19%, she maintained that her desire to ‘push for growth’. Although she admitted she may have miscalculated with the mini-budget.

Truss said:

‘We went further and faster than markets were expecting … I want to be honest, this will be difficult … we owe it to the next generation to improve economic growth’.

At the end of the poorly received speech reporters asked whether Truss felt she had the right to remain prime minister after she fired Kwasi Kwarteng earlier in the day for delivering the mini budget.

Concerns over Truss’s credibility and the future of her premiership likely contributed to the Sterling selling bias on Friday.

Euro (EUR) Mixed as the Ukraine-Russia Conflict Continues to Escalate

The Euro (EUR) was trading in a broad range on Friday as Russia announced it would evacuate residents from Kherson after an appeal from the Russian-installed head of the region.

This move, along with continued missile strikes stoked fears that Kherson could potentially become the conflict’s new frontline. Valdimir Putin also threatened to close humanitarian corridors within Ukraine to stop them from being used in ‘acts of terror’.

A Kherson council member told Reuters that:

‘This ‘evacuation’ announced by Saldo is an evacuation for collaborators and traitors in the region... they want to take these collaborators to Russia.’

EUR investors were wary as they fear the loss of Kherson could push Putin to respond with another escalation of the conflict.

GBP/EUR Exchange Rate Forecast: Mini Budget to Drive GBP?

Looking ahead the Pound Euro exchange rate will likely remain sensitive to fiscal and political developments in the UK.

Questions over Liz Truss’s premiership could drag on Sterling in the coming days as rumours swirl that she could be ousted by senior Conservatives.

Elsewhere a lack of data means the Euro will be subject to news about the war in Ukraine as investors consider the geopolitical impact of the escalating conflict.

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TAGS: Pound Euro Forecasts