Weakening German Consumer Confidence Fails to Weigh Down Euro (EUR) Today, Pound (GBP) Remains Soft on UK GDP Shortfall
Despite the German Consumer Confidence Survey for November showing the expected slump in optimism, falling from 9.6 to 9.4, the Pound Sterling to Euro (GBP/EUR) exchange rate is on a downtrend on Wednesday morning. Investor sentiment towards the Pound (GBP) has remained weak overnight after yesterday’s disappointing UK GDP report.
The outlook of the Pound (GBP) has softened today after the third quarter UK GDP printed at a weaker level than forecast, throwing doubt on the odds of a nearer-term interest rate rise from the Bank of England (BoE).
Euro (EUR) Exchange Rate Bearish in spite of Improved IFO Business Sentiment after ECB Dovishness
Demand for the Euro (EUR) remained weak on Monday in spite of a relatively strong printing on the German IFO Business Sentiment Surveys. Although both the Business Climate and Expectations indexes showed unexpected increases, these were counterbalanced by a weaker showing on the Current Assessment figure, which slipped from 114 to 112.6 in October. Concerns over the Volkswagen emissions scandal appear to be seen as relatively fleeting, even if the crisis has dealt a significant blow to confidence in the Eurozone’s powerhouse economy in the short-term. Nevertheless the dovishness of European Central Bank (ECB) President Mario Draghi after last week’s Rate Decision has continued to weigh on the appeal of the common currency.
While the UK’s BBA Loans for House Purchase report clocked in at a weaker level than expected, defying expectations for a minor uptick to instead retreat to 44,489, this was ultimately not enough to trigger a particular downtrend for the Pound (GBP). This signal of slowdown within the domestic housing industry, however, has once again raised suggestions that the Bank of England (BoE) may not opt to move on interest rates until at least the second quarter of 2016.
Pound (GBP) Currency News: UK GDP Falls Short of Forecast Today as Economic Growth Weakens
Investors have been taking a relatively cautious approach to Sterling on Tuesday morning in advance of the third quarter UK GDP. News was not positive for the Pound, though, as economic growth was revealed to have slowed further than expected in the third quarter from 0.7% to 0.5%. With the year-on-year figure also unexpectedly slipping, from 2.4% to 2.3%, this dealt a blow to the odds of a nearer-term interest rate increase from the BoE. As a result sentiment quickly turned bearish, pushing the GBP/EUR exchange rate into a downtrend.
GBP/EUR Exchange Rate Forecast: Euro Could Resume Downtrend with Upcoming German Data
The single currency could shed further value in the later week, with tomorrow’s German Consumer Confidence Survey and Thursday’s German Unemployment Change both expected to weaken. While the domestic Unemployment Rate is forecast to remain steady at 6.4% this is unlikely to provide enough positive stimulus to bolster the Euro from its bearish trend.
Thursday will also see the publication of further UK data, including Nationwide House Prices and Mortgage Approvals figures. As these are expected to show relative robustness within the domestic housing market this could offer a rallying point for the Pound, although it is unlikely to entirely eclipse the dovish impact of today’s disappointing GDP reading.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was shedding value in the range of 1.3876, while the Euro to Pound Sterling (EUR/GBP) pairing climbed in the region of 0.7206.