Euro to Pound Exchange Rate Struggles for Direction despite Concerning German Data
While the Pound (GBP) recovered from its recent lows against many major currencies yesterday, the Euro to Pound (EUR/GBP) exchange rate was able to remain relatively close to its best levels. This is despite concerning Eurozone data and political news.
No-deal Brexit fears throttled the Pound again last week, making it easy for EUR/GBP to climb from 0.91 to an impressive 0.93.
On Monday, EUR/GBP briefly touched on a high of 0.9395. This was the best level for the pair since the financial crisis a decade ago. While EUR/GBP has slipped since then, it still holds above most of last week’s levels and is currently trending near 0.9275.
The Euro to Pound exchange rate is currently seeing mixed movement in reaction to today’s data.
Euro (EUR) Exchange Rates Avoid Major Losses despite Plunging German Economic Sentiment
Despite continued signs of weakness in Germany’s economic outlook, the Euro (EUR) has been avoiding significant losses over the past week.
Last week’s concerning German data included industrial production stats, and this morning’s ZEW economic sentiment index from Germany was worrying as well.
ZEW’s German economic sentiment index unexpectedly contracted at -44.1 rather than the forecast -28.5. Current conditions came in at -13.5 rather than the expected -7.
The Eurozone’s overall economic sentiment index was over twice the expected contraction, at -43.6.
The report followed this morning’s German inflation data, which met projections, and German wholesale prices which contracted a little more than forecast.
Pound (GBP) Exchange Rate Outlook Little Affected by UK Job Market Report
The Pound saw mixed movement today, as no-deal Brexit fears and some UK job market uncertainties weighed and prevented Sterling from gaining against a weaker Euro.
Some aspects of this morning’s UK job data was fairly optimistic, with wage data excluding bonuses rising more than expected to 3.9%. The number of new jobs created was stronger than forecast too, coming in at 115k.
However, other aspects of the report were underwhelming. Britain’s unemployment rate unexpectedly worsened from 3.8% to 3.9%.
This caused some concerns that Britain’s job market was peaking. According to Tej Parikh, Chief Economist at the Institute of Directors:
‘While competition has pushed up salaries, thin margins and low productivity may set a ceiling for pay growth. Although vacancies remain high by historic standards, the number has been dropping since the start of the year.’
Euro to Pound (EUR/GBP) Exchange Rate Investors Anticipate German Growth Report
Continued weakness in German and Eurozone data has not yet been enough to knock the Euro to Pound (EUR/GBP) exchange rate further from its multi-year highs.
However, investors may not be able to ignore much further weakness in German data.
Tomorrow will see the publication of the remainder of this week’s most influential Eurozone ecostats, including Q2 growth rate projections for both Germany and the Eurozone.
Germany’s Q2 growth rate is expected to have slowed significantly, with most analysts expecting the economy to have contracted a little.
If the German growth rate is even worse than expected, fears of a German recession will rise and the Euro may struggle to hold near its recent highs.
UK inflation data could offer Sterling some support tomorrow if it impresses investors, which would also knock the Euro to Pound (EUR/GBP) exchange rate lower.
