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EUR/GBP Exchange Rate Dips after German Economic Sentiment Dwindles

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The Euro to Pound Sterling (EUR/GBP) is currently trending around 0.7949, hitting a low of 0.7946 and a high 0.7980. Movement is around -0.30% which is likely a result of poor results pertaining to European economic sentiment.

Yesterday was less-than-satisfactory for those backing the Euro. Having had no significant domestic data releases to focus on, traders looked to geopolitical events to gauge market direction. The Euro, being a riskier currency than those considered ‘safe haven’, dipped against many of the majors.

There was also very little data yesterday to give direction to the Pound. Despite this, Sterling managed fractional gains against many currencies as market volatility cooled after a difficult week ahead of tomorrow’s significant labour market data.

Today is very similar, in terms of the lack of domestic data for Sterling, to yesterday.

European data, conversely, holds more weight economically today with the release of the ZEW survey for German economic sentiment and the ZEW survey for Eurozone economic sentiment.

The ZEW Indicator of Economic Sentiment for Germany has declined significantly in August 2014. Having been forecast to drop from the previous figure posted of 27.1 to 17.0, many were surprised to see the actual data decline to 8.6 which is the lowest level since December 2012. The declination of German economic sentiment, decreasing for the eighth consecutive time, is likely to be connected to ongoing geopolitical tensions.

The ZEW Indicator of Economic Sentiment for the Eurozone also posted a significant drop. The indicator has lost 24.4 points compared to the previous month, now standing at 23.7 points. This is also likely to be connected to geopolitical unrest.

The Euro to Pound exchange rate (EUR/GBP) has hit a high today of 0.7980.

Forecast for the Euro to Pound Exchange Rate

Tomorrow will be an important day for both currencies in the pairing, in particular the GBP.

Particularly interesting, from a UK economic standpoint, will be the correlation (or lack thereof) between results posted for average weekly earnings and unemployment rate. Unemployment rate is forecast to drop marginally from 6.5% to 6.4%. Average weekly earnings are also forecast to drop from 0.3% to -0.1%. Should this occur it is increasingly unlikely that the Bank of England (BoE) policy makers will hike interest rates before the close of the year.

Perhaps the most important data concerning the UK’s economic standing will be the Bank of England’s Inflation Report. The inflation projections for the coming quarter will shape market direction.

In terms of European data tomorrow’s year-on-year German Consumer Price Index will be of interest. It is forecast to remain at the 0.8% figure previously posted.

Thursday will be an incredibly important day for the Euro. Amongst the several reports due for release on that day the most significant will be the year-on-year German gross domestic product (GDP) report and the Eurozone GDP report. German GDP is forecast to drop from 2.5% to 1.3%. The Eurozone GDP has no forecast figure.

The Euro to Pound (EUR/GBP) exchange rate has hit a low today of 0.7943.