- Pound (GBP) extends losses
- UK bans import of Russian oil
- Euro (EUR) rises on bond issue reports
- No high impacting Eurozone releases
The Pound Euro (GBP/EUR) exchange rate is edging a few points lower for a third straight day. The pair settled- 0.44% lower on Tuesday at €1.2016, as the pair continues to fall away from €1.2194 the 5-year high reached at the start of the week. At 05:45 UTC, GBP/EUR trades -0.04% at €1.2013.
The Euro charged higher on Tuesday boosted by news that the EU could jointly issue a massive amount of bonds in order to finance energy and defense spending amid the ongoing Russian war. Officials have yet to release further details, but the news helped to prop up the euro.
Ukraine confirming a humanitarian corridor allowing civilians to escape Sumy and Mariupol, along with reports that Ukraine is open to discussing non-NATO models, in a nod to Russia all helped the euro extend its recove4ry from 5-year lows versus the pound.
Eurozone GDP data was in line with expectations, showing that economic growth slowed to 0.3% in the final three months of the year, down from 2.2% growth in Q3. Weaker household spending was a key cause for softer growth as Omicron cases rose.
Looking ahead there is little on the eurozone economic calendar to keep investors’ attention. Instead, Russia Ukraine developments are likely to take central stage again.
The pound fell against the euro and against other major peers such as the US dollar. The UK together with the US moved to ban Russian oil in what is expected to be the largest financial crackdown on Russian since it invaded Russia. The UK gets 4% of its gas and 8% of its oil from Russia, the US gets no gas and 7% of its oil. However, the EU gets around 40% of its oil from Russia and 27% of its oil, highlighting how dependent it is on Russia.
The transition is likely to be expensive and slow. However, should oil hit $160 which is could well do this summer, inflation is likely to rise to around 9.5%
