Euro to Pound Exchange Rate: EUR/GBP Sinks as German Economic Sentiment Fails to Impress Markets

January 21, 2020 - Written by John Cameron

STORY LINK Euro to Pound Exchange Rate: EUR/GBP Sinks as German Economic Sentiment Fails to Impress Markets

EUR/GBP Exchange Rate Falls as Eurozone Growth Continues to Weaken

The Euro Pound (EUR/GBP) exchange rate fell by -0.3% today, with the pairing currently trading around £0.850 despite the release of stronger-than-expected German ZEW survey data for economic sentiment this month, with the figure rising from 10.7 to 26.7.

Although the report showed a 4-year high, this wasn’t enough to boost the EUR/GBP exchange rate.

ZEW President Achim Wambach commented:

‘This gives rise to the hope that the trade dispute's negative effects on the German economy will be less pronounced than previously thought. Although the outlook has improved, growth is still expected to remain below average’.

With Germany being the Eurozone’s powerhouse economy, this report failed to provide much hope for single currency traders today. Economic sentiment continues to disappoint in light of severely compromised growth within the Eurozone’s largest economy.

US-China trade uncertainty has returned to haunt European markets, however, as the ‘phase one’ trade deal between the two superpowers has come under further scrutiny from markets.

Now that doubts over the longevity of the trade pact are being called into question, the dimming outlook for Germany’s foreign trade-reliant has begun to drag on EUR.

GBP/EUR Exchange Rate Edges Higher, UK Employment Beats Records

The Pound (GBP) rose against many of its peers today following the release of November’s UK ILO unemployment rate, which remained at a record low of 3.8%, while employment improved in a boost for the UK economy.

Ed Monk, Associate Director at Fidelity International, commented that today’s UK’s wage report for November had also provided a boost for the economy, saying:

‘Wage data shows the rate of annual wage growth stabilising. Regular pay (excluding bonuses) ticked lower, which taken along with lower inflation suggests the case for the Bank to cut interest rates next week remains strong.’

Today’s generally upbeat UK economic data has limited concerns of an interest rate cut from the Bank of England later on this month. As a result, the GBP/EUR exchange rate has risen on renewed hopes for the British economy this year.

EUR/GBP Outlook: Could Sterling Sink on Increasing BoE Rate Cut Odds?

Euro investors will be looking ahead to tomorrow’s French business climate figure for January, with any signs of improvement in the French economy providing a boost to the weakened single currency.

However, the main mover of the EUR/GBP exchange rate tomorrow will be December’s UK public sector net borrowing figure. Any further improvement in the UK economy could lower the odds of a BoE rate cut, an outcome that would be Pound-positive.

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TAGS: Euro Forecasts Euro Pound Forecasts Pound Euro Forecasts