EUR to GBP Exchange Rate Avoids Losses despite Concerning German Business Sentiment

June 24, 2019 - Written by Tim Boyer

STORY LINK EUR to GBP Exchange Rate Avoids Losses despite Concerning German Business Sentiment

Last week saw European Central Bank (ECB) President Mario Draghi took a dovish shift in tone, but despite this the Euro to British Pound (EUR/GBP) exchange rate ultimately climbed throughout the week due to concerns about UK politics and Brexit causing broad weakness in the Pound. The Euro continued to edge higher today despite the latest Eurozone data coming in mixed.

After opening last week at the level of 0.8925, EUR/GBP spent most of the week fluctuating on mixed appetites for both currencies. EUR/GBP even briefly touched on a post-January best of 0.8969 earlier in the week, and ultimately ended the week higher near the level of 0.8950.

EUR/GBP has continued to trend within this relatively tight region since markets opened this morning. After a brief dip in the morning, EUR/GBP rebounded due to persisting Pound weakness and at the time of writing was trending closer to the week’s opening levels again.

EUR Exchange Rates Avoid Losses despite Fresh Signs of Weakness in German Business Data

The Euro’s appeal has been limited lately, as the Eurozone’s economic activity continues to show signs of weakness and bets for monetary policy easing from the European Central Bank (ECB) rise.

In one of the most significant recent shifts in ECB speculation, ECB President Mario Draghi took a more dovish tone on the Eurozone’s economic performance and indicated that the bank was prepared to loosen monetary policy if Eurozone inflation did not improve.

However, the Euro ultimately still advanced versus an even weaker Pound.

The Euro benefitted from weakness in the US Dollar amid surging Federal Reserve interest rate cut expectations, as well as some stronger than expected Eurozone data at the end of last week.

Demand for the Euro even remained stronger than the Pound’s on Monday, despite the day’s German business confidence data from Ifo coming in mixed.

Germany’s June business climate and current conditions stats beat forecasts, but expectations unexpectedly slipped even lower than expected.

What’s more, while the business climate figure beat expectations, it was still the worst figure for the print since 2014. Analysts reacted to the news by suggesting that Germany’s economic activity was likely to be particularly slow in Q2.

According to Carsten Brzeski from ING:

‘A bottoming-out is in sight for German industry,

The recent u-turn of the ECB towards more dovishness indicates that financing conditions for new domestic investments will remain favourable. However, let’s be clear, a bottoming out is still far from being a strong rebound.’

Ultimately though, despite this the Euro continued to benefit from weakness in its rival, the US Dollar. Federal Reserve rate cut expectations keep rising, keeping the US Dollar tumbling.

GBP Exchange Rates Continues to Tumble on Political and Brexit Fears

Another week, another outlook of political and Brexit uncertainties weighing on the Pound’s appeal.

Last week saw the UK Conservative Party leadership contest conclude the MP voting phase. Brexiteer Boris Johnson emerged as the clear frontrunner as expected, with Jeremy Hunt coming in second.

The two will now go head to head in a vote from the Conservative Party’s wider membership base, and Johnson is expected to emerge the victor by the end of next month.

With Johnson expected to win, Pound investors are anxious about his harder Brexit stance, as well as his claims that he would aim for a no-deal Brexit rather than delay the process again.

With no-deal Brexit fears reviving, political uncertainties also worsened over the weekend.

Reports that police were called on a row between Johnson and his partner, as well as news that planned leadership contest debates had been cancelled due to Johnson’s refusal to participate, worsened political uncertainty.

EUR/GBP Exchange Rate Forecast: Eurozone Data in Focus to Influence ECB Bets

Britain’s economic calendar will be relatively quiet this week, and Pound movement is most likely to be only influenced by political and Brexit developments regardless.

As a result, Euro to Pound exchange rate investors will be focusing on Eurozone economic data this week, as it could influence European Central Bank (ECB) interest rate cut bets if it surprises investors.

Tuesday will see the publication of Germany’s June business confidence data, which will be followed by German and French consumer confidence on Wednesday.

However, the biggest slews of Eurozone data will come in on Thursday and Friday, when Eurozone confidence stats and inflation rate projections will be published.

CBI will publish its June UK distributive trades data tomorrow, which is the week’s most notable UK data. The Euro to Pound exchange rate’s movement will be focused on Eurozone data and UK political news.

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TAGS: Forecasts