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Euro Pound (EUR GBP) Gains as German Business Confidence Beats Expectations

  • Euro Pound Rate Climbs to 0.8960 – Pound Euro Rate Drops to 1.1197
  • German Business Confidence Hits New High – EUR GBP Bolstered
  • UK GDP Due Wednesday – Markets Forecast Drop
  • BoE’s Andy Haldane Due to Speak this Evening – Haldane Previously Hawkish

Yesterday the Euro Pound exchange rate slipped as the Eurozone published a run of disappointing PMIs.

Today, however, the single currency managed to push back, as the German business confidence survey came in higher than expected and the Pound became bearish before tonight’s speech by Bank of England (BoE) Chief Economist Andy Haldane and tomorrow’s UK GDP figures.

Euro (EUR) Bolstered by Renewed German Business Confidence

The Euro gained this morning after the release of the latest German business confidence survey from the IFO Economic Institute.

Data revealed that the business climate index increased from 115.2 in May to 116 in June, smashing expectations of a slip to 114.9.

IFO Chief Clemens Fuest stated:

‘Sentiment among German businesses is euphoric. Companies’ satisfaction with their current business situation reached its highest level since Germany’s reunification. Their short-term business outlook also improved. Germany’s economy is powering ahead’.

With private consumption being so robust of late, German businesses remain optimistic about the future.

EUR GBP Expected to Climb Should UK GDP Growth Decrease

The UK’s GDP figures are due tomorrow and are currently forecast to have eased from 2% growth year-on-year to 1.9%. The Pound has become somewhat bearish ahead of this news as a slower rate of output could push BoE policymakers away from further hawkish sentiment.

In addition, the International Monetary Fund (IMF) downgraded its outlook for Britain’s economy yesterday, asserting that it is slowing and that growth of only 1.7% is likely this year – a 0.3% drop from the April forecast.

IMF Chief Economist Maurice Obstfeld stated: ‘Our projection for the United Kingdom this year is. . . lowered, based on the economy’s tepid performance so far.

Obstfeld added: ‘The ultimate impact of Brexit on the United Kingdom remains unclear’.

Should tomorrow’s UK GDP figures prove disappointing, the Euro Pound exchange rate may push back to 8-month highs.

Pound Sterling (GBP) Slip Likely if BoE Policymaker Andy Haldane Proves Dovish

Markets are currently awaiting a speech this evening from BoE Chief Economist Andy Haldane.

Haldane has previously been hawkish, asserting that he would vote for a rate hike this year.

However, with recent UK inflation data disappointing, markets have become anxious that Haldane may be unable to perpetuate his hawkish outlook. Should Haldane indeed make a shift towards the dovish, then demand for the Pound will diminish, especially considering that the likelihood of a 2017  interest rate hike is already extremely small.

Current Interbank EUR GBP Exchange Rates

At the time of writing, the Euro to Pound Sterling (EUR GBP) exchange rate was trading at 0.8952 and the Pound Sterling to Euro (GBP EUR) exchange rate was trading at 1.1166.