- EUR GBP Exchange Rate Around 0.8650 – Sterling recovers after Monday selloff
- German Consumer Confidence Disappoints – Plus Deutsche Bank concerns weigh
- Update: German Data Published on Thursday – German flash CPI impresses
- Forecast: Key Eurozone Stats Due Friday – Unemployment and flash CPI due for bloc
EUR GBP Exchange Rate Advances on German Inflation
Despite trending relatively narrowly for much of Thursday’s session, Sterling investors gave up on holding the Pound near key levels due to yet more impressive Eurozone data, and the EUR GBP exchange rate climbed to above 0.8650.
The main driving factor for Euro investors on Thursday afternoon was a better-than-expected German Consumer Price Index (CPI) flash score. Month-on-month inflation was on track to hit 0.1% in September, beating expectations of a stagnant 0.0%.
The yearly score, on the other hand, improved from 0.4% to 0.7%, surpassing the expected improvement to 0.6%.
This figure added to hopes that the European Central Bank’s (ECB) easing measures were finally helping to stimulate inflation in Eurozone countries. This mood will surely put pressure on Friday’s preliminary Eurozone inflation report to impress.
(Previously updated 12:45 BST 29/09/2016)
EUR GBP Exchange Rate Edges Higher Thursday Morning
The EUR GBP exchange rate attempted to advance on Thursday morning, boosted by better-than-expected Eurozone confidence scores.
However, as German unemployment unexpectedly worsened slightly and Sterling was boosted by UK officials talking up trade deal potential, the Euro’s advances were limited.
Eurozone economic confidence improved from 103.5 to 104.9 in September, and the month’s business climate indicator jumped from 0.02 to 0.45.
While Britain’s own economic data disappointed, with mortgage approvals falling to a 21-month-low of 60,058 in August, the Pound held its ground a little better thanks to comments made by UK Trade Secretary Liam Fox.
Fox stated on Friday morning that Britain was hoping for some kind of free trade deal with the European Union despite Britain’s vote to leave the bloc in June. Despite warnings from EU officials that such a deal would not likely be possible, Fox’s comments cheered UK markets slightly.
(Previously updated 16:29 BST 28/09/2016)
EUR GBP Exchange Rate Flat on Wednesday
The EUR GBP exchange rate trended in a relatively narrow range on Wednesday afternoon despite fluctuating widely in the morning, as the day’s news left both the Euro and Sterling generally unappealing to investors.
On top of the morning’s underwhelming German GfK consumer confidence figures, the Euro was also weighed down by continued speculation and jitters surrounding a perceived crisis with Germany’s Deutsche Bank group.
A German newspaper, Die Zeit, reported that the German government was drafting up a rescue plan for the banking group. While this briefly boosted the Euro in the morning, its gains were quickly reversed when German officials went on record to deny the report.
Sterling, on the other hand, continued to see mixed movement. Some investors bought it from its cheap levels, but the currency ultimately didn’t make much impact on its rivals throughout Wednesday’s European session.
(Previously updated 11:22 BST 28/09/2016)
The EUR GBP exchange rate failed to hold its highs on Tuesday afternoon despite Brexit concerns weighing on the market, as investors bought the Pound up from its lows amid the day’s lack of influential data.
The pairing was little changed on Wednesday after the German GfK Consumer Confidence Survey was published. The gauge dipped from 10.2 to 10.0 in October rather than remaining unchanged.
Euro Pound was trending in the region of 0.8627.
(Previously updated 28/09/2016)
Despite hitting a three-year-high of 0.8711 on Monday morning, EUR GBP has slipped since then and on Tuesday afternoon dropped to below the week’s opening levels of 0.8655 – trending in the region of 0.8640.
Euro (EUR) Limited by Lack of Strong Data, Deutsche Bank Concerns
Tuesday’s session simply didn’t offer the Euro enough support, leaving the currency limp as other more appealing currencies took point and advanced on the shared currency.
Monday’s optimistic German business sentiment survey results from IFO were unable to give the Euro a lasting boost, despite beating expectations in every print.
The IFO’s business climate print scored 109.5, current assessment came in at 114.7 and expectations at 104.5. The figures collectively indicated that German businesses had high hopes for the autumn’s economic activity.
However, the Euro slipped against most rivals during Tuesday’s European session, as markets grew anxious over the perceived crisis with Germany’s Deutsche Bank after it had been fined $14bn by the US. The Telegraph reported;
‘If the German government does not stand behind the bank, then inevitably all its counter-parties – the other banks and institutions it deals with – are going to start feeling very nervous about trading with it. As we know from 2008, once confidence starts to evaporate, a bank is in big, big trouble. In fact, if Deutsche does go down, it is looking increasingly likely that it will take Merkel with it – and quite possibly the Euro as well.’
German Chancellor Angela Merkel had previously stated that the government would not bail out the bank. Speculation that the Euro itself could suffer from the crisis weighed on Euro trade on Tuesday.
Pound (GBP) Recovery Capitalised by Weaker Euro
Despite a lack of optimistic factors for Sterling traders thus far this week, some investors opted to buy the currency from its cheapest levels on Tuesday after it trended near post-Referendum lows on Monday.
Sterling was relatively limp on Tuesday afternoon, being dragged around by currency cross-flows following Friday and Monday selloffs on speculation of a ‘Hard Brexit’.
A ‘Hard Brexit’ is the name being given to the potential of Britain withdrawing from the European Union without managing to negotiate access to some EU benefits – such as single market access.
UK markets which thrive on the UK’s access to the single market have become increasingly anxious that the possibility would become reality, despite analysts and forecasters predicting the likelihood as low for some time.
However, Sterling was able to hold its ground slightly better on Tuesday as the currency’s previous market selloff faded. GBP was also given a slight boost by news that the World Trade Organisation (WTO) had forecast the UK would avoid a post-Referendum recession. The Belfast Telegraph reported;
‘The WTO said Britain’s vote to leave the European Union will put the brakes on UK economic growth, but will not see it succumb to an “outright recession”.
“The UK referendum result did not produce an immediately observable downturn in economic activity as measured by industrial production or employment; the main impact was a 13% drop in the exchange rate of the Pound against the US Dollar and an 11% decline in its value against the Euro.”’
EUR GBP Exchange Rate Forecast to Strengthen if German Data Impresses
While Germany’s Deutsche Bank continues to be a point of anxiety for Eurozone investors, the EUR GBP exchange rate remains near its best levels and still has the opportunity to hit new three-year-highs if September’s Eurozone data continued to impress.
Wednesday will see the publication of GfK’s October German consumer confidence survey results, which are expected to remain at 10.2. If the score comes in higher, the Euro might find more solid footing in Wednesday trade.
Sterling, on the other hand, could be offered a little more support if Nationwide’s September house prices report beats expectations. The Pound could also advance on Thursday if August’s UK consumer credit and mortgage approval figures come in above forecasts.
Thursday’s biggest mover will ultimately be the Euro however, as Thursday’s session sees the publication of Germany’s September unemployment figures and preliminary Consumer Price Index (CPI) scores. Final Eurozone September confidence scores will also be published.
As it stands, the EUR GBP exchange rate’s losses are likely to be limited unless Sterling traders find something a little more solid to base a Pound recovery on, while upcoming German data could push EUR GBP to new highs if scores beat expectations.
