Euro Pound Exchange Rate Falling despite Solid German Confidence Data
Market sentiment around the Euro (EUR) has been mixed today, but the Euro Pound (EUR/GBP) exchange rate is tumbling this afternoon. Investors are finding the Pound (GBP) more appealing as some coronavirus vaccine fears soften.
Since opening this week at the level of 0.8895, EUR/GBP has been trending with a downside bias. After briefly attempting recovery this morning, EUR/GBP is now trending in the region of 0.8864 – the worst levels for the pair all week.
However, EUR/GBP is still well above last week’s four-month-lows of 0.8833.
Markets are in consolidation so far this week, but the next big moves could happen on upcoming Eurozone data or coronavirus developments.
Euro (EUR) Exchange Rates Fall despite Solid German Sentiment Stats
Demand for the Euro has been too mixed today for the shared currency to hold its ground against the Pound’s volatile movement.
This is due largely to the market’s uncertainty over the coronavirus pandemic and vaccine distribution.
There has been concern about the Eurozone’s smaller than expected number of vaccine doses. Fears also rose earlier in the week that the EU could block vaccination exports due to the shortfall of vaccinations that made it to the EU as agreed.
EU Trade Commissioner Valdis Dombrovskis said today that the EU was not planning bans or restrictions on vaccination exports. This relieved markets a little.
Today’s German industrial sentiment data was generally optimistic, but it was not enough to boost Euro demand.
Pound (GBP) Exchange Rates Buoyed by Vaccine Hopes and UK Data
With coronavirus vaccine fears doused for now, the slightly more risk-correlated Pound is seeing a bit of a relief-related jump today.
According to Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets:
‘It’s a function of the broader risk dynamic so I think Sterling is still trading rather more on risk orientation than it is the domestic fundamental story’
Optimism that vaccines will continue to rollout smoothly are keeping the Pound fairly appealing. On top of this, the Pound may have found a little support in today’s stronger than expected UK job market report.
However, while the job markets was stronger than projected in November, analysts remain anxious about the potential damage the job market could see without continued government support.
Euro Pound (EUR/GBP) Exchange Rate Could Firm if Eurozone Data Continues to Impress
The Euro to Pound exchange rate will continue to be driven largely by the Pound’s movement, unless there are any big surprises in the Eurozone outlook.
For example, investors have little reason to keep buying the Euro as it is, but if upcoming Eurozone data continues to impress investors it may boost the Euro outlook overall.
Wednesday’s session will see the publication of German and French consumer confidence results, as well as French jobseekers data.
Thursday’s session will follow with overall Eurozone confidence stats. Then, Friday will round out the week with French and German growth rate results.
Amid a lack of UK data due in the coming sessions, the Pound’s movement will be driven more by any developments in the coronavirus pandemic.
If Britain’s situation shows signs of improvement, the Pound’s appeal is likely to firm.
On the other hand, a combination of strong Eurozone stats and a worsening UK coronavirus outlook would make it easier for the Euro Pound (EUR/GBP) exchange rate to recover.
