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Euro Pound Exchange Rate Sinks, German Factory Sector Remains in Recession

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EUR/GBP Exchange Rate Sinks as German Business Sentiment Fails to Boost Euro’s Appeal

The Euro Pound (EUR/GBP) exchange rate eased this morning, with the pairing currently trading around £0.856 after today’s release of November’s German IFO business climate sentiment index rose from 94.7 to 95.

On the other hand, the German IFO expectations index undershot projections at 92.1 for November, leaving some investors feeling jittery over prospects for the Eurozone’s powerhouse economy.

The EUR/GBP exchange rate has continued to sink following the IFO Institute’s report that the German factory sector still remains in a recession.

Clemens Fuest, President at the IFO, commented:

‘In the service sector, the business climate has improved. Traders were more satisfied with the current situation … The signs are that business will be very good this Christmas. Manufacturing, however, is still stuck in recession.’

After last week’s first speech by the newly appointed President of the European Central Bank (ECB, Christine Lagarde, investors remain unconvinced that the bank will ease its stimulus measures any time soon.

Meanwhile, today will see a speech by Philip Lane, the Chief Economist at the ECB, and with any dovish commentary about the bank’s policy going forward, we could see the EUR/GBP exchange rate further weaken.

GBP/EUR Exchange Rate Rises, Conservatives Set to Maintain Majority Ahead of Election

The Pound (GBP) edged higher against the Euro (EUR) today after the Conservatives remain on course to secure a majority ahead of the 12th December General Election following Sunday’s publication of the Tory’s manifesto.

Jordan Rochester, a Strategist at the investment bank Nomura, recommended caution, however, saying:

‘I would not recommend a fresh GBP long position here as it may only take a few polls showing a Labour party bounce or indeed another gaffe moment in UK politics from the Conservatives to put the market’s current base case in doubt and with it cause GBP’s recent grind higher to come undone.’

With markets generally favouring the Conservatives over the Labour Party, due to their more pro-business policies and markedly clearer stance on Brexit, any signs that the Tories could retain their lead could further boost the GBP/EUR exchange rate.

In UK economic news, today will see the release of November’s CBI distributive trades survey, which is expected to hold at -10%.

However, this report left the Pound unmoved as UK markets continue to focus on political developments ahead of December’s election instead.

EUR/GBP Outlook: German Consumer Confidence in Focus

Euro (EUR) traders will be looking ahead to tomorrow’s publication of December’s German GfK consumer confidence survey, which is expected to hold at 9.6. Any signs of improvement, however, could bolster the single currency on returning optimism for Germany’s flagging economy.

Tomorrow will also see a speech by the ECB’s Chief Economist, Philip Lane, with investors again paying close attention to the bank’s tone going forward.

UK political developments will continue to drive the EUR/GBP exchange rate this week, with any indications of the Tories furthering their lead in the polls ahead of next month’s election likely boosting the Pound.