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Euro to Pound (EUR/GBP) Exchange Rate Edges Higher as German Consumer Confidence Improves for August

Pound Euro exchange rate forecast

EUR/GBP Exchange Rate Rises as German Consumers Leave ‘Corona Shock’ Behind

The Euro to Pound (EUR/GBP) exchange rate edged higher today, with the pairing currently trading around £0.911.

The Euro (EUR) edged higher today after the German GfK Consumer Confidence Survey for August beat forecasts, rising from -9.4 to -0.3.

Pollsters GfK were cautious in their analysis, however, citing fears of another Covid-19 lockdown as being particularly damaging to the Eurozone’s largest economy:

‘German consumers are leaving the corona shock from the spring of this year more and more behind. [However], [a]nother lockdown would quickly destroy all hopes of an economic recovery.’

However, many EUR investors are optimistic that the Eurozone’s economy could be on the road to recovery. This follows the passing of the €750 billion EU recovery fund, which has been perceived as a turning point in the bloc’s financial integration.

Ugo Lancioni, head of global currency at Neuberger Berman, explains:

‘This deal removed almost completely the risk of a European break-up, which has always been on the mind of investors.’

Pound (GBP) Struggles Despite Rising Optimism in the UK Manufacturing Sector

The Pound (GBP) struggled today following the release of July’s CBI Industrial Trends Survey, which fell to a worse-than-expected -46%. As a result, GBP investors are becoming increasingly concerned about Britain’s economic recovery from the coronavirus pandemic.

Rain Newton-Smith, CBI chief economist, was cautious in her assessment, saying:

‘Manufacturers continue to face extreme hardship due to the COVID-19 crisis. Output volumes continued to decline at a record pace, while total orders have fallen at their fastest rate since October 1980.’

‘There are tentative signs of gradual recovery on the horizon, with firms expecting output and orders to begin to pick up in the next three months. But demand still remains deeply depressed.’

Meanwhile, GBP investors are becoming increasingly concerned about UK-EU post-Brexit trade talks. This follows yesterday’s reports that Downing Street was now preparing to leave on World Trade Organisation (WTO) terms.

However, a spokesperson for Prime Minister Boris Johnson attempted to reassure people that UK-EU negotiations had not broken down, saying:

‘The discussions do continue to be constructive and I think that’s been the case throughout this intensified state of the discussions, but equally I think we acknowledge that there are still significant differences on a number of important issues.’

EUR/GBP Outlook: Could a Recovering UK Services Sector Boost the Pound?

Euro (EUR) investors will be looking ahead to tomorrow’s release of the flash Eurozone Markit PMI Composite figure for July. Any improvement in the Eurozone’s economy would prove EUR-positive.

GBP traders will be awaiting tomorrow’s release of the latest UK retail sales for June. Any uptick in the figures would prove GBP-positive.

Tomorrow will also see the release of the flash UK Markit Services PMI. If the UK’s largest sector improves this month, then we could see Sterling claw back its losses.

The GBP/EUR exchange rate will also remain sensitive to news over UK-EU post-Brexit trade negotiations. Any signs of a breakdown in talks would drag down Sterling.