The pound to euro exchange rate direction is being driven by the energy crisis and the lingering impact of the pandemic on full reopening of the economies in England and the Eurozone.
Besides this, a change in risk sentiment has weighed down the pound. Uncertainty on Boris Johnson’s leadership plus tensions between Russia and the US over Ukraine have been building.
A risk-off market mood always favours the safe-haven Euro over the riskier Pound.
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The pound has been resilient enough to withstand Prime Minister Boris Johnson’s troubles. However, if he implements any new taxes for consumers in a nation that is already in a tough economic situation then it will likely have a significant effect on the currency.
But despite this, the British pound has had a good start to the year—its best start to a year since 2018.
The euro has recently slipped below 1.1350 and looks to continue to slide down. From what’s been communicated by ECB President Christine Lagarde, the gap between Fed and ECB policy is only going to increase over the near future.
Lagarde mentioned that the ECB will act more cautiously than the Fed given their lower base of underlying inflation, which will hold back the relative value of the euro.
Note that forecasts and predictions for the GBP/EUR exchange rate change all the time, affected by news events and relative sentiment towards the UK and Eurozone economies and this exchange rate is even more volatile than usual because of the uncertainties around Brexit.
You can read more about GBP cross-rate forecasts here GBP Trends and Forecasts for 2021.
Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.