Surprise Drop in German Confidence sees EUR GBP Exchange Rate Dip

January 25, 2017 - Written by Ben Hughes

STORY LINK Surprise Drop in German Confidence sees EUR GBP Exchange Rate Dip

The Euro to Pound exchange rate performed poorly on Thursday afternoon, as investors became concerned about the long-term health of the Euro project.

As markets feared that the Eurozone would not recover as quickly as hoped and the Euro may also see damage in the next 18 months, EUR/GBP failed to capitalise on the day’s weak Pound.

[Previously updated 26/01/2017]

Even though the German GfK consumer confidence survey bettered expectations this was not enough to boost the Euro to Pound exchange rate on Thursday morning.

Demand for Sterling improved on the back of a better-than-expected UK GDP report, with economic growth having remained solid in the fourth quarter.

[Previously updated 25/01/2017]

Euro Demand Drops along with German Economic Confidence

Today has seen a deterioration of the Euro Pound exchange rate, with the single currency dropping by around -0.3%.

This follows the announcement of German Ifo confidence measures for January, which have shown unexpected declines for business climate and expectations and only a marginal advance for the current conditions field. Summarising the situation, Ifo President Clemens Fuest stated that;

‘The German economy made a less confident start to the year’.

German Data Remains Key for Future Euro Movement

For the remainder of the week, Euro movement is likely to be determined by further German announcements, consisting initially of a speech this afternoon from Bundesbank President Jens Weidmann.

Following this will be a GfK consumer confidence result on Thursday morning; this is expected to rise marginally from 9.9 to 10.

Friday’s closing Eurozone data will consist of German producer price changes along with Italian confidence scores for January. In the latter case, a drop in consumer confidence is predicted from 111.1 to 110.6.

Pound Euro Demand Climbs as UK MPs Plan Article 50 Bill Amendments

Having crashed in the immediate aftermath of the Supreme Court verdict that Parliament should vote on Article 50, the Pound Euro exchange rate has since recovered.

Although little has changed since yesterday, investors nonetheless seem to have taken on board the idea that MP amendments to the Article 50 trigger bill could have a positive impact on Brexit proceedings.

The next event to watch out for in this line will be the publication of the bill itself, which is expected from Brexit Secretary David Davis by the end of the current week or before the end of the next, at the latest.

Pound Euro Rate Predicted to Drop if UK GDP Growth Slows on Thursday

The last big UK announcements this week are due this afternoon and on Thursday morning, barring an update on the Article 50 bill which is also incoming.

Today we'll see Bank of England (BoE) Governor Mark Carney give a speech in Germany.

Thursday morning’s ecostats will concern the initial Q4 GDP growth rate figures, which are expected to show a slowdown on both the quarter and the year.

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