The Euro (EUR) to Pound (GBP) exchange rate weakened further on Wednesday to 0.783 as more economic data out of the Eurozone came in below expectations and as concerns mount over the strength of the 18-member region’s economy.
Earlier in the session European Central Bank (ECB) President Mario Draghi took to the airwaves in an attempt to calm fears over the state of the Eurozone economy. The Euro received some support from his comments after he reiterated that the Central Bank would do everything it can to prevent the region sliding into deflation and recession.
‘Monetary policy will remain accommodating for a long time and I can tell you that the Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just fewer than 2%. Interest rates will remain low because they can’t get much lower,’ said Draghi in an interview with France’s Europe 1 radio station.
Any support received by Draghi’s comments however was lost after the latest IFO business confidence data out of Germany was released.
The IFO business climate index declined to a reading of 104.7 in September, a drop from the 106.3 reading seen in the preceding month and was much weaker than the 108 recorded in September of the previous year. The figure was the lowest seen since April 2013 and was well below economist forecasts for a reading of 105.7.
‘Increased geopolitical tensions and weakening emerging market economies, including China, are taking a toll. At least for the ECB, today’s IFO index is good news as it should hush German protests against the latest asset-purchasing programme and even against future possible quantitative easing,’ said the chief economist at ING-DiBa.
The poor data comes a day after a report showed that manufacturing production in the Eurozone’s largest economy slowed to a 15-month low. The data adds to fears that the Eurozone’s biggest economy is losing momentum.
Euro to Pound Sterling Exchange Rate Forecast
Further gains for the Pound are likely to be restrained as the currency comes under pressure from increasing expectations that the UK will join the USA and other allies in launching airstrikes against the Jihadist Islamic State in Iraq. A lack of market moving domestic data was also likely to keep Sterling movements limited.
Euro traders will want to look ahead to Friday’s German GFK Consumer Confidence data for further indications as to whether the Eurozone’s largest economy is continuing to struggle.
Euro Exchange Rate News:
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