Pound Euro (GBP/EUR) Exchange Rate Rises as German Consumer Confidence Slips

November 28, 2018 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Rises as German Consumer Confidence Slips

GBP/EUR Exchange Rate Recovers Ground on Poor German Consumer Confidence Data

The Pound Euro (GBP/EUR) exchange rate gained ground today, and is currently trading at €1.1336, after the release of Germany’s poor Gfk consumer confidence figures dampened investor confidence in the single currency.

The EUR was also hit after its initial confidence in Italy backtracked on its possible budget concession, forcing the European Commission (EC) to consider once more issuing disciplinary action against the Eurozone’s third-largest economy.

GBP found support after today’s news that corporate lending had slowed throughout the Eurozone, with data from the ECB showing a year-on-year 3.9% increase on last year – slowing its pace after hitting a high of 4.2% in September.

Pound Euro (GBP/EUR) Exchange Rate Gains Ground Despite Continuing Brexit Quarrels

The GBP/EUR exchange rate gained on the single currency today despite continuing uncertainty surrounding May’s Brexit withdrawal agreement, with recent comments from US President Donald Trump, who called the deal a ‘very big negative’, hindering May’s progress towards a Parliamentary consensus.

The Chancellor of the Exchequer, Philip Hammond, said that the ‘economy will be slightly smaller in the Prime Minister’s preferred version of the future partnership [between UK and the EU],’ knocking investor confidence in Sterling.

Today will also see the release of the Bank of England’s (BoE) Financial Stability Report, which is expected to be bearish for GBP.

Potentially echoing Hammond’s statement that May’s withdrawal agreement ‘delivers an outcome that is very close to the economic benefits of remaining in’, the BoE is likely to lend support for May’s Brexit deal.

Euro (EUR) Hit after Italy’s Budget Stubbornness Recalls EC to Take Disciplinary Action

The Euro (EUR) meanwhile, suffered today as traders focused on the return of Italy’s budget stubbornness, with Italy’s Prime Minister Giuseppe Conte and his two deputies, Matteo Salvini and Luigi Di Maio, saying in a joint statement:

‘The objectives that have already been fixed are confirmed.’

This will force the EC to take action against Italy, with EU officials pencilling in a date for the ‘effective deficit procedure’ (EDP) which would possibly see Rome pay a fine of approximately €9bn.

Meanwhile the EUR has found some support from today’s M3 Money Supply figures which showed a year-on-year increase of 3.9%.

However, these gains were clipped by Germany’s Gfk consumer confidence figures taking a dip of 0.2 points, now showing at 10.4 against last month’s 10.6.

With decreasing consumer confidence indicative of a potentially slowing economy, markets remain hesitant as the Eurozone faces political turbulence.

GBP/EUR Outlook: Brexit Turbulence and Italy’s Budget Remain in Focus

The GBP/EUR exchange rate is likely to face turbulence over the coming week, with Theresa May staying centre stage as she tries to convince MPs in the last crucial hurdle of the Brexit withdrawal agreement.

Thursday will see the release of the October’s UK mortgage approvals, with an expected drop potentially damaging Sterling further as the housing market slows.

Friday will also see the UK’s Gfk consumer confidence figures for November, which are also expected to show a downturn, further diminishing investor confidence in Sterling.

EUR is likely to face further turbulence this week with the publication of the EU’s Financial Stability Review by the ECB on Thursday, which will no doubt take into consideration Italy’s situation and the imminent disciplinary actions likely to be undertaken by the EC.

Friday will then see the release of the EU’s latest Consumer Price Index for November, which is also expected to reveal a downturn with consumer spending being impacted by continuing economic volatility.

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TAGS: Pound Euro Forecasts