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Euro Pound Exchange Rate Sours as Eurozone Economic Sentiment Misses Forecasts

Euro Pound exchange rate forecast

The Euro Pound (EUR/GBP) exchange rate has soured this morning as the latest ZEW economic sentiment index from both the Eurozone and Germany fell further than expected.

At the time of writing the EUR/GBP pairing are trending around the £0.8463 level as the Pound continues to find support from domestic coronavirus developments from the UK.

Euro (EUR) Weakens on Economic Sentiment Index

The Euro (EUR) has weakened against the majors this morning as the latest economic sentiment index from the Eurozone, and Germany, softened more than forecast.

Germany, the Eurozone’s largest economy, economic sentiment fell to 40.4 points for August a souring from the 63.3 points the month previous.

ZEW President Achim Wambach commented on the latest index and what it means for the German economy going forward:

‘Expectations have declined for the third time in a row. This points to increasing risks for the German economy, such as from a possible fourth covid-19 wave starting in autumn or a slowdown in growth in China.’

‘The clear improvement in the assessment of the economic situation, which has been ongoing for months, shows that expectations are also weakening due to the higher growth already achieved.’

Further limiting the single currency today has been a resurgence in the US Dollar (USD) which due to the negative correlation between the pairing has caused the Euro to weaken.

Pound (GBP) Supported by UK Coronavirus Developments

The Pound (GBP) has strengthened against the Euro this morning despite a lack of economic data from the UK.

Sterling continues to find support from domestic coronavirus developments which has kept the appeal of the Pound broadly appealing.

It comes as UK daily coronavirus cases start to level off as experts comment that we are nearer the end of the pandemic.

The Pound also found support from Scotland’s lockdown easing measures that came into force yesterday, though unlike the UK, Scotland has chosen to continue implementing the use of face masks.

Euro Pound Exchange Rate Outlook: German Inflation in Focus

For Euro investors, tomorrow will see the release of the latest German inflation rate figures from July.

If inflation rises to 3.8% as forecast, the Euro could find some much needed support and head higher against its major rivals.

A lack of economic data from the UK will continue to see investors keeping an eye on any further coronavirus developments to drive movement in Sterling moving forward.