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Euro Pound Exchange Rate Climbs on Positive German Business Climate Indicator

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Euro Pound Exchange Rate Rises amid Better-Than-Expected German Figures

The Euro Pound (EUR/GBP) exchange rate is gaining ground after Germany’s business climate index printed above expectations.

At the time of writing, the EUR/GBP exchange rate is trading at around £0.8427, up roughly 0.3% from today’s opening levels.

Euro (EUR) Bolstered by Germany’s Surprisingly Positive Business Climate Indicator

The Euro (EUR) is trading higher against the Pound (GBP) today following a better-than-anticipated reading for Germany’s business climate index.

As the Eurozone’s largest economy, Germany’s upbeat figures have boosted the single currency.

The Ifo’s business climate index printed at 91.8. This is higher than both market forecasts and the previous reading of 89.1 and 90.8, respectively. Businesses appeared surprisingly upbeat in the face of the ongoing war in Ukraine.

According to Ifo President Clemens Fuest:

‘After the initial shock of the Russian attack, the German economy has shown its resilience.’

Despite this, many experts believe the positive figures do not compute with change on the ground.

Alexander Krueger, chief economist at bank Hauck Aufhaeuser Lampe, said:

‘The general climate is no different than a month ago due to the war in Ukraine. Companies are still in a bad mood, especially when looking ahead.’

Meanwhile, Russia’s invasion of Ukraine continues to weigh on the single currency, capping demand for the Euro today.

Pound (GBP) Falls amid UK Political Anxiety

The Pound (GBP) is trading down against the Euro (EUR) in response to uncertainty in UK politics.

The UK Prime Minister, Boris Johnson, is being scrutinised by members of parliament – both Conservatives and the opposition – after he was fined for being in breach of 2020’s lockdown rules.

Johnson is thought to receive additional fines in due course, in spite of repeatedly claiming all ‘rules were followed at all times’ and reiterating he ‘has nothing to hide’.  

As a result, the Privilege Committee will explore whether the PM knowingly misled parliament. This will occur after the police have concluded their official investigation.

If the PM is found guilty of knowingly misleading the house, he will be expected to resign in accordance with the ministerial code.

Moreover, a number of Conservative MPs are reportedly looking to oust Johnson as fears of the ‘Partygate’ scandal may scamper the party’s chances at local elections.

Furthermore, Bank of England (BoE) policymakers have struck a broadly dovish tone in recent weeks. This has caused interest rate hike bets to deteriorate and is dampening GBP appeal.

On the data front, the Confederation of British Industry has revealed a slump in business optimism during the second quarter.

CBI business optimism printed at -34, significantly down from the previous reading of -9 and missing forecasts of -23.

Furthermore, CBI industrial trends for April printed at 14, failing to reach the expectations of 21 and considerably below March’s reading of 26.

Overall, this is weighing on GBP exchange rates.

Euro Pound Forecast: Will ECB Policymaker Strike Hawkish Tone?

Looking ahead, the Pound Euro exchange rate may be influenced by a speech from European Central Bank (ECB) policymaker Fabio Panetta scheduled for this evening.

Will Panetta reiterate the hawkish stance of ECB? If so, it may bolster demand for the single currency.

Later in the week, the Pound may be impacted by a speech from BoE Governor Andrew Bailey. If Bailey is unable to commit to a rate hike at the next policy meeting, it is likely to pressurise GBP exchange rates.