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GBP/EUR Exchange Rate Accelerates as German Consumer Confidence Plunges

GBP/EUR Exchange Rate Rallies on Gloomy German Data 

The Pound to Euro (GBP/EUR) exchange rate is trending higher this morning, after data showed that German consumer confidence continues to fall. 

At the time of writing the GBP/EUR exchange rate is trading at around €1.1327, up roughly 0.3% from today’s opening levels. 

Euro (EUR) Knocked by Weak German Consumer Confidence Data 

The Euro (EUR) is on the defensive against the Pound (GBP) and the majority of its other peers this morning in the wake of Germany’s latest consumer confidence figures. 

According to data published by market research institute GfK, German consumer morale has plunged going into February, with the confidence index tumbling from –7.5 to –15.6. 

This was well below consensus estimates of a more modest slide to –7.9, and was the worst reading since June. 

Unsurprisingly the deterioration in consumer sentiment has been driven by coronavirus concerns, with Germany’s extended lockdown as unemployment concerns sapping confidence. 

Rolf Bürkl, consumer researcher at Gfk, commented: 

‘The closure of restaurants and, in mid-December 2020, large parts of the retail sector has hit consumer sentiment as similarly hard as it did during the first lockdown in the spring of last year. 

‘For a sustained recovery, it is necessary that the infection figures fall more sharply than they have so far, so that measures can be noticeably eased. The recovery that many are hoping for this year will still be some time coming.’ 

Most worrying for EUR investors was that the latest survey showed a sharp drop in consumers’ willingness to spend money, something which would further hamper Germany’s economic recovery. 

Pound (GBP) Steady amidst Hopes Lockdown Questions Will be Answered Next Month 

Meanwhile, the Pound (GBP) is holding its ground this morning following the news that Boris Johnson will seek to publish the criteria for easing lockdown next month. 

The current lockdown in England is set to be reviewed in mid-February, but recent comments from ministers suggest that it is unlikely that any easing will take place at this time, even if the government’s targets to vaccination the 15 million most at risk have been met. 

However, the publication of a document detailing the criteria for easing restrictions will at least clear up some of the uncertainty surrounding the lockdown, and is therefore likely to be welcomed by GBP investors. 

GBP/EUR Forecast: German GDP in the Spotlight 

Looking ahead, the Pound to Euro (GBP/EUR) exchange rate may struggle to consolidate its gains in the second half of the week as the focus turns to Germany’s latest GDP figures. 

Friday’s figures are expected to show that German economic growth was at 0% in the fourth quarter of 2020, which if correct, would see the Eurozone’s largest economy avoid a double-dip recession this winter potentially boosting the Euro. 

In the meantime, there will also be the publication of Germany’s consumer price index tomorrow, where a rebound in inflation could also offer some support to the single currency. 

For GBP investors the focus is likely to remain on the UK’s vaccination programme, with the Pound potentially offered some support if the rollout continues to gather pace.