Euro Pound (EUR/GBP) Exchange Rate Fluctuates as Consumer Confidence Hits Eight-Month High
The Euro Pound (EUR/GBP) exchange rate is trading narrowly as German consumer confidence rose for the sixth straight month.
At time of writing, the EUR/GBP exchange rate is around £0.8794, relatively unchanged from this morning’s opening levels.
Euro (EUR) Undermined by Persistent Inflationary Pressures
The Euro (EUR) remains relatively quiet today despite an uptick in consumer sentiment in the bloc’s largest economy. Gfk released the latest consumer sentiment report and showed consumer morale in Germany hit its highest level since July 2022.
However, despite the significant improvement over the past eight months, the score remains in negative territory. Rising from -30.6 to -29.5, the index still came in under expectations. Gfk Consumer Expert Rolf Bürk, commented on the latest data:
‘Income expectations are currently benefiting from the recent noticeable drop in energy prices, especially for gas and heating oil. Nevertheless, inflation will remain high this year…
‘The expected loss of purchasing power is preventing a sustained recovery in domestic demand. Accordingly, private consumption is unlikely to make a positive contribution to economic growth in Germany this year. This is also signalled by the still very low level of consumer sentiment.’
Pound (GBP) Supported by ‘Strong and Resilient’ UK Banking System
The Pound is experiencing mixed success this morning amid a lack of major economic data. Fears of recession linger amid reassurances from the Bank of England (BoE) that the UK banking system will not fall foul of the kind of turmoil that has plagued the US and European banking sector.
After testifying before the Treasury Committee, BoE Governor Andrew Bailey reassured investors and the wider market on the strength of the UK banking system. As UBS swooped in to rescue Credit Suisse, and similar collapses and takeovers in the US, the central bank’s Financial Policy Committee (FPC) had no such qualms with the UK banking sector. They said:
‘Recent weeks have seen several overseas banks fail or come under severe stress. Banks’ share prices fell across the world and investors became more cautious.
‘The FPC is monitoring these events and the potential impact on UK banks and financial stability. UK banks are resilient and are strong enough to support households and businesses.’
Euro Pound Exchange Rate Forecast: Central Bank Speeches to Influence Proceedings?
Looking ahead, the Euro Pound exchange rate could see further movement with speeches from both central banks. BoE policymaker Catherine Mann will likely take her usual hawkish stance and call for further interest rate hikes, which could spur the Pound.
Meanwhile, speeches from ECB policymaker Isabel Schnabel could also provide support for the Euro for similar reasons. Discussing the inflation outlook at the NABE conference, Schnabel could boost the Euro if she talks of further rate hikes to bring inflation down.
