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Euro Pound (EUR/GBP) Exchange Rate Steady, German Recession Fears Weigh on Single Currency

GBP Pound exchange rate

EUR/GBP Exchange Rate Rangebound, US-EU Trade Relations in Focus

The Euro Pound (EUR/GBP) exchange rate held steady today, with the pairing currently trading around £0.858 after Germany’s ZEW Survey into economic sentiment beat forecasts in November and rose from -22.8 to -2.1.

ZEW President Achim Wambach commented:

‘There is growing hope that the international economic policy environment will improve in the near future, which explains the sharp rise in the ZEW Indicator of Economic Sentiment in November. In the meantime, the chances for an agreement between Great Britain and the EU and thus for a regulated withdrawal of Great Britain have noticeably increased.’

However, the Euro’s gains were prevented by ongoing fears over the German economy, which is expected to face a technical recession in the third quarter.

European markets are now focusing on US President Donald Trump’s speech today, with the EUR/GBP exchange rate likely to rise if he rules out increasing tariffs on European vehicles and auto parts.

Chris Beauchamp, an Analyst at IG, commented:

‘Unlike the US-China spat, the US-EU argument has been much more muted, which at least provides hope that the US is going to avoid opening up a second front in the trade war, reasoning that a new conflict ahead of the next election might not be the wisest move.’

GBP/EUR Exchange Rate Flat, UK Average Earnings Fall Below Expectation in September

The Pound (GBP) failed to gain on the Euro (EUR) following today’s release of the UK average earnings figure, which fell to a worse-than-expected 3.6% in the three months to September.

Meanwhile, UK employment also fell by 58,000 in September, further exacerbating fears that the UK’s jobs sector is slowing down amid ongoing Brexit uncertainty.

While September’s UK ILO Unemployment Rate beat forecasts today, falling from 3.9% to 3.8%, this wasn’t enough to boost market optimism in Britain’s flagging economy.

Chris Williamson, an Economist at HIS Markit, commented:

‘Recruitment agencies reported that the demand for permanent staff at employers had grown at the joint slowest rate for a decade in October, as uncertainty and worries about the outlook reduced firms’ appetite to take on extra employees.’

British political developments have remained in focus today, with UK markets becoming increasingly uncertain that the Brexit Party’s concession to target Labour-strongholds instead of challenging Tory-held areas could sway the 12th December election.

Chris Curtis, YouGov’s Political Research Manager, said:

‘[Brexit Party leader Nigel] Farage’s decision to stand aside in current Conservative-held seats and not in Labour-held seats that the Tories will be looking to gain will likely make very little difference.’

EUR/GBP Outlook: Could Improving German Inflation Boost the Euro?

Euro traders will be looking ahead to tomorrow’s release of Germany’s inflation figure for October, which is expected to hold at 0.9%. However, any signs of improvement could buoy the Euro to Pound exchange rate.

Tomorrow will also see the release of the Eurozone’s month-on-month industrial production figure, which is expected to fall from 0.4% to -0.3%.

Meanwhile, Sterling traders will be awaiting tomorrow’s publication of the UK Consumer Price Index for October, which is expected to ease from 1.7% to 1.6%.

The EUR/GBP exchange rate will likely be driven by the UK’s political developments this week, with any signs of the Tories securing their lead in the polls boosting the Pound on heightened political stability.