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Euro Pound Exchange Rate Edges Higher Despite Softening in German Business Confidence

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The Euro Pound (EUR/GBP) exchange rate has edged higher since markets opened this morning, as a lack of economic data from the UK limits the appeal of Sterling.

At the time of writing the EUR/GBP exchange rate is trending around the £0.8561 level as the single currency finds support despite a softening business confidence index from Germany.

Euro (EUR) Supported by Despite Falling German Business Confidence Index

The Euro has found itself supported against the Pound this morning despite a second consecutive fall in the latest German business confidence index during August.

German business confidence missed forecasts of 100.4 and instead fell to 99.4 points as concerns mount over the delta variant of the coronavirus.

The report from the Ifo, who compiles the survey, said:

‘Concerns are growing in the hospitality and tourism sectors in particular. Supply bottlenecks for intermediate products in manufacturing and worries about rising infection numbers are putting a strain on the economy.’

‘The decline was mainly due to the significantly less optimistic expectations of companies. In the hospitality and tourism sectors in particular, concerns are growing. On the other hand, companies rated the current situation somewhat better than in the previous month. Supply bottlenecks for intermediate products in industry and worries about increasing numbers of infections are burdening the economy.’

However, the ramped up vaccination rollout across the Eurozone has allowed for some cautious optimism surrounding the bloc’s economic recovery.

Pound (GBP) Unable to Gain Traction on Absence of Data

The Pound has been unable to gain any traction against the Euro today as an absence of economic data continues to limit the appeal of Sterling.

It comes as supply chain issues continue to worry investors about the UK’s recovery from the worst of the coronavirus pandemic.

Andrew Sentance, a former member of the Bank of England’s monetary policy committee, commented on the issues that may face the UK down the line, saying:

‘It’s quite striking, I don’t think we can dismiss this as a flash in the pan. Now that lockdown has been eased, we’re seeing a truer reflection of the impact of Brexit and issues building up before the pandemic.’

‘We could see this persisting for longer than people expect. Skills shortages could go on for a few years, the impact of Brexit on our ability to attract workers from the EU is not going to go away quickly and the process of training was quite significantly disrupted by the pandemic, when people were not working and furloughed.’

Euro Pound Exchange Rate Outlook: German Consumer Confidence in Focus

For Euro investors, tomorrow will see the release of the latest GfK consumer confidence index from the Eurozone’s largest economy, Germany.

If consumer confidence dips further the Euro could find itself struggling across the board.

Pound traders will keep an eye on any further domestic coronavirus developments from the UK to drive movement in GBP exchange rates.