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EUR/GBP Rate Worsens on Lower Confidence; Will Euro Recover on Eurozone Optimism?

November 27, 2017 - Written by Ben Hughes

The Euro saw progressive gains against the Pound last week, but ultimately only made a small overall rise.

EUR/GBP trading opened in the region of 0.8893 on Monday, later closing slightly higher at a rate of 0.8946 late on Friday.

Eurozone Confidence Drop Leads to EUR/GBP Exchange Rate Drop



Disappointing Italian data has weakened the Euro today, causing the single currency to dip against the Pound.

Consumer and business confidence readings have been declining in November.

The drops haven’t been major, but when confidence was tipped to rise instead of fall, this has been seen as bad news.

Responding to the lower confidence readings was Massimiliano Dona, President of the National Consumer Association;

‘It’s bad news ahead of Christmas.

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The worsening views of the household budgets and of the intentions for durable good purchases don’t lead us to be optimistic with regard to the shopping season’.


The Euro has additionally been kept in check by recent warnings from European Central Bank (ECB) Executive Board member Benoit Coeure.

Speaking on Friday, Mr Coeure cautioned about the impact of false statistics;

‘Just as there are concerns about "fake news" dominating social media, there is a risk of "fake", or at least poor quality, statistics driving out better quality ones in public discourse.

Just as false reports may quickly go viral, reliance on internet search data in the assessment of the economic situation may become self-fulfilling’.


Pound Advances on Industrial Strategy Hopes



The Pound has firmed against the Euro today, thanks to optimism about the UK industrial strategy.

Designed to cushion the UK economy from the worst effects of Brexit, these industrial plans have been met positively by Pound traders.

Explaining the reason for publishing the strategy was Business Secretary Greg Clark;

‘Until we get a final agreement [on Brexit], clearly there is going to be some uncertainty.

So it seems to me that it’s especially important to cast ahead to the long term and provide as much clarity as you can about what the fundamentals of our business environment are going to be.

That’s what we’re doing in the industrial strategy’.


There are hopes that the plans will result in financial partnerships with companies within the UK, which could inspire innovation and provide more employment opportunities.

Euro on Track to Rise if Eurozone Confidence Climbs



The Euro could pick up in trading against the Pound this week, assuming that Eurozone data ends up matching with forecasts.

First up will be Tuesday morning’s German GfK consumer confidence reading.

This is forecast to show minimal growth in national confidence, although such a result still might enable a clear Euro Pound rate rise.

A 10.7 to 10.8 point confidence increase doesn’t seem important, but would indicate resilience as Germany is currently without a functioning government.

It is hoped that Angela Merkel’s CDU/CSU union will form a functional coalition in the coming weeks and months, which could eventually inspire a sharp Euro to Pound rate rise.

Confidence measures will remain in the spotlight on Wednesday morning, when Eurozone-wide stats are announced.

As with the German reading, expectations are for higher confidence readings across the board. Key stats include the business confidence reading as well as a finalised consumer confidence score.

Wednesday afternoon could bring yet more support to the Euro if the German inflation figures show growth as expected.

Over in the UK, the Pound may be impacted by a pair of Bank of England (BoE) reports that will be released over Tuesday and Wednesday.

Respectively, these will consist of a financial stability report and a later consumer credit report.

The stability report looks at the current health of the UK economy and whether it is vulnerable to any economic shocks in the future.

Banks failing stress tests will be cause for concern, as will forecasts of economic turbulence in the weeks and months ahead.

The consumer credit report could also cause GBP volatility, if it shows a significant increase in borrowing levels.

In the past, BoE officials have voiced concerns about growing levels of consumer debt, so news of a rising debt mountain might see traders abandon the Pound.
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