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Pound Sterling to Euro Exchange Rate Recovers on Weaker German Consumer Confidence

Pound to Euro Exchange Rate Rebounds despite Lack of Optimistic Brexit News

Following its Tuesday slide, the Pound Sterling to Euro (GBP/EUR) exchange rate rebounded slightly on Wednesday as the Pound (GBP) benefitted from the latest bout of Euro (EUR) weakness.

Since opening this week at the level of 1.1307, GBP/EUR has trended largely with a downside bias.

GBP/EUR briefly touched on a weekly low of 1.1255 on Tuesday, before recovering to nearer the week’s opening levels at the time of writing on Wednesday.

While the Pound doesn’t have much in the way of fresh supportive news, besides attempts from UK officials to bolster domestic support for the UK-EU Brexit bill, Sterling was more appealing than the Euro today.

The Euro, on the other hand, has been weaker amid underwhelming Eurozone ecostats, as well as fresh strength in its rival, the US Dollar (USD).

Pound (GBP) Demand Limited as Brexit Uncertainties Continue to Weigh

So far this week, there has been little in the way of supportive news for Sterling, leaving the British currency largely limp amid ongoing uncertainties about domestic support for the UK-EU Brexit bill.

Market focus has turned towards the perceived chances that the UK-EU Brexit deal will fail to pass through UK Parliament.

Many MPs in UK Prime Minister Theresa May’s Conservative Party, as well as MPs from the allied Democratic Unionist Party (DUP), have indicated they will vote against the deal when it comes to Parliament vote in early-December.

Sterling saw additional pressure on Tuesday, following criticism of the UK-EU deal from US President Donald Trump and UK ex-Defence Secretary Sir Michael Fallon.

Analysts believe the deal will pass Parliament eventually, but not the first time. According to Steve Fielding, Professor of Politics at Nottingham University:

‘No one thinks this will get through the first time,

At least 90 MPs have said they will vote against it. The risk is actually that, with everyone discounting the first vote, you get more.’

Euro (EUR) Exchange Rates Unappealing as German Consumer Confidence Slides

The Euro has been generally unappealing this week, amid persisting Eurozone political uncertainties and economic concerns.

Continued tensions between Italy and the EU regarding Italy’s controversial budget have left the shared currency volatile.

Demand for the Euro fell under additional pressure on Wednesday, as GfK’s December German consumer confidence survey stats fell short of expectations.

German consumer confidence was expected to slide from 10.6 to 10.5, but instead came in at just 10.4. The GfK report said:

‘Whilst the propensity to buy has in fact been able to improve its already very good position, economic and income expectations have had to take slight hits,’

On top of Eurozone economic and political jitters, the Euro was pressured by fresh strength in the US Dollar (USD) on Wednesday as the currencies are often negatively correlated.

Hawkish Federal Reserve comments boosted the US Dollar and weakened the Euro, amid speculation that monetary policy divergence between the US and Eurozone would deepen.

Pound to Euro (GBP/EUR) Exchange Rate Investors Anticipate Eurozone Inflation

While recent Eurozone data has been underwhelming, the Euro may find stronger support if key Eurozone data impresses investors in the coming sessions.

Thursday will see the publication of a slew of notable Eurozone ecostats, including France’s latest growth rate projections, German unemployment rate stats, and Eurozone consumer and business confidence figures.

However, the most influential dataset tomorrow will be Germany’s November Consumer Price Index (CPI) projections, which are expected to show that inflation slowed slightly year-on-year.

If German inflation beats forecasts, it would make markets more confident about Eurozone price pressures and this may lead to higher European Central Bank (ECB) tightening bets.

Friday will follow with the Eurozone’s overall unemployment rate for October and November inflation projections, which could prove even more influential for the Euro.

Of course, any surprising Brexit developments or strong US Dollar (USD) movements may also influence the Pound Sterling to Euro (GBP/EUR) exchange rate.