Pound Euro Exchange Rate (GBP EUR) Tests Higher Following Disappointing LTRO Repayment Data

February 22, 2013 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate (GBP EUR) Tests Higher Following Disappointing LTRO Repayment Data

There was distinctly mixed news from the eurozone today. The latest German GDP data revealed that economic activity in the giant Teutonic economy had contracted by 0.6% during the final three months of last year. Although the market had been expecting a showing at around this level for the finalised Q4 print, it still served as a reminder to investors of the worryingly fragile state of the continental European economy.

The disappointing German GDP data was partly mitigated by the latest IFO business climate survey, release a few hours later, which showed at a considerably higher than expected level. The print of 107.4 versus last month’s 104.3 for the IFO Business Climate survey suggests that the majority of business people in the eurozone’s premier economy view the economic slowdown at the end of last year was nothing more than a temporary blip.

Sentiment surrounding the single currency took another hit a short while ago when official European Central Bank data revealed that the level of LTRO repayments in today’s second tranche of pay-backs from Europe’s retail banks to the ECB was well below market expectations. After a larger than expected volume of LTRO1 payments, hopes had been high for a similarly encouraging showing. The bad news for the euro sent the GBP EUR exchange rate up to almost 1.1600 a short time ago.

Further upside could follow for GBP EUR next week if the result of this weekend’s Italian general election sees an anti-austerity coalition grab power in the troubled Mediterranean nation. With political analysts suggesting that such an outcome is a live possibility, it would appear that the euro is not yet out of the woods.

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