EUR/GBP Exchange Rate Rises as Hopes Grow for German Economy
The Euro to Pound (EUR/GBP) exchange rate rose by 0.2% today, with the pairing currently fluctuating around £0.90.
The Euro (EUR) edged higher today despite the release of the Eurozone’s core CPI figure for July, which fell unexpectedly by -0.3% month-on-month. However, the year-on-year figure confirmed forecasts and rose by 1.2%.
Many analysts commented that the pick-up in inflation pressures last month were down to rising prices in non-energy industrial goods. Consequently, optimism in the Eurozone’s economy has improved.
Bundesbank also expressed optimism for Germany, the largest economy within the Eurozone. The bank commented:
‘The clear and broad-based recovery in macroeconomic performance, which began after the low point in April, will continue.’
‘The German economy should grow very strongly in the summer quarter of 2020.’
As a result, the EUR/GBP exchange rate has edged higher on growing hope for the bloc’s economic recovery from the coronavirus pandemic.
Pound (GBP) Dips as Doubts Grow Over UK Economy
The Pound (GBP) failed to rise against the single currency today despite the release of the UK CPI data for July, which rose by 1% year-on-year.
Jeremy Thomson-Cook, Chief Economist at Equals Money, commented on the data, saying:
‘While an inflation rate of 1% is still well below the Bank of England’s targeted figure of 2%, a period of rising inflation alongside the other well-known issues that the UK economy has to navigate in the coming months – an end to the furlough scheme and a decision one way or the other on Brexit – would make things even more painful for those whose incomes have been hit by the pandemic.’
Meanwhile, some Sterling investors have become more hopeful after Downing Street announced that it was aiming to secure a UK-EU post-Brexit trade deal in September.
Nevertheless, GBP traders are remaining cautious as the UK economy continues to be challenged by uncertainty around the coronavirus pandemic and relations between the UK and the EU post-Brexit.
EUR/GBP Forecast: Could Improved UK Consumer Confidence Buoy Sterling Tomorrow?
Euro (EUR) investors will be looking ahead to tomorrow’s publication of the German producer price index for July. Any improvement in the Eurozone’s largest economy would prove EUR-positive.
Tomorrow will also see the release of the European Central Bank’s (ECB) monetary policy meeting accounts. If the ECB is notably dovish, however, we could see the EUR/GBP exchange rate fall.
The EUR/GBP exchange rate could also sink tomorrow if the UK GfK Consumer Confidence report for August shows any signs of improvement.