Drop in Economic Sentiment Leaves EUR/GBP Exchange Rate Unchanged
The Euro Pound (EUR/GBP) exchange rate appears largely muted this morning following the release of the Eurozone’s latest economic sentiment figures.
At the time of writing EUR/GBP is holding close to this morning’s opening levels after the pairing ceded its early gains this morning.
Euro (EUR) Subdues as Economic Sentiment Dips
The Euro has found little movement against the Pound this morning as markets reacted to the latest confidence data from within the Eurozone.
According to data published by the European Commission, the bloc’s latest Economic Sentiment index was shown to have fallen from 114.9 to 114.1 in February.
This was the second consecutive fall in sentiment after the index struck a 17-year high of 115.3 in December.
This drop in sentiment was largely attributed to the turmoil in stock markets at the start of this month, with those surveyed urging caution as wait to see whether markets rebound in March.
However despite the dip analysts remain fairly upbeat as the robust reading suggests that firms are confident in further growth.
Bert Colijn, Senior Economist at ING said;
‘While the ESI dropped from 114.9 to 114.1 in February, the underlying survey questions continue to portray significant economic strength.
‘In services, confidence actually increased as the business situation over the past three months improved markedly.’
Pound (GBP) Muted amid Rising Brexit Concerns
At same time the Pound is struggling to find any gains this morning as growing Brexit uncertainty begins to hang over the currency once again.
This is largely in preparation for the draft release from the EU outlining its proposals for a Brexit withdrawal treaty later this week.
The document is set to be a major headache for Theresa May as the EU looks to set out terms for maintaining an open border in Ireland.
Sources suggest that the draft will include promises to maintain an open border between the Republic of Ireland and Northern Ireland, but will make no mention of doing the same between Northern Ireland and the rest of the UK.
This could prompt an angry response from the DUP, whose support May relies upon to prop up her government.
EUR/GBP Forecast: Dip in Germany Inflation to Pressure Euro?
Looking ahead the EUR/GBP exchange rate may be forced to retreat this afternoon at Germany publishes its latest Consumer Price Index (CPI).
Economists forecast that the latest CPI reading will reveal that Germany’s inflation rate slid from 1.6% to 1.5% in February, its lowest levels since May last year.
With the European Central Bank (ECB) targeting an inflation rate of 2% across the wider Eurozone this dip in pressure from the Eurozone’s latest economy is unlikely to inspire confidence that this will occur anytime in the near future.
Meanwhile on the data front the UK will release its latest PMI figures later this week, with the Pound likely to tumble if they reveal that private sector activity slowed in February as expected.
