Pound Sterling Euro (GBP/EUR) Exchange Rate Stalls in spite of Three-Year Low in German Confidence

Weak German Consumer Confidence Fails to Boost Pound Sterling Euro (GBP/EUR) Exchange Rate

A weaker-than-expected German GfK consumer confidence index was not enough to offer the Pound Sterling to Euro (GBP/EUR) exchange rate a boost this morning.

Although consumer sentiment fell to a three-year low of 9.6, highlighting a continued decline in confidence within the Eurozone’s powerhouse economy, the Euro (EUR) held onto a positive footing.

The latest set of German IFO business sentiment indexes offered investors greater cause for confidence, with expectations showing an unexpectedly solid improvement on the month.

This encouraged hopes that the German economy could recover some of its lost momentum before the end of the year, even though the third quarter growth data is still expected to confirm a recession.

Johnson’s Threat to Pull Brexit Deal Pushes Pound Lower

The latest twist in the ongoing Brexit situation weighed heavily on Pound Sterling (GBP), meanwhile, as Labour looked set to reject Boris Johnson’s proposed general election.

As Johnson responded with a threat to pull his Brexit deal in the event of MPs not approving his desired election this triggered fresh alarm bells.

This prompted EU leaders to pause their expected announcement of a fresh extension of the Brexit deadline, casting renewed doubt over the UK’s future.

Markets were disappointed by this development, dragging GBP exchange rates lower in response to this fresh wave of uncertainty.

Brexit Deadline Uncertainty Limits Potential for GBP Exchange Rate Recovery

Johnson’s latest ploy could see the GBP/EUR exchange rate remain on the back foot in the days ahead as UK politics continue to deter investors.

With less than a week now left before the current Brexit deadline a lack of EU action may drive the Pound sharply lower across the board.

Even though the odds still favour a multi-month extension until the EU officially confirms an offer GBP exchange rates are expected to feel persistent pressure.

The mood towards the Pound could sour further on Monday if October’s CBI distributive trades index falls deeper into negative territory.

Evidence of the ongoing negative impact that Brexit-based uncertainty is already having on the UK economy may give investors additional incentive to sell out of the Pound.

German Import Price Contraction Set to Drag Down Euro

Worries over the health of the German economic outlook are likely to persist in the coming days, creating the potential for renewed selling pressure on the Euro.

Tuesday’s German import price index readings may leave the single currency on a weaker footing, with forecasts pointing towards another month of sharp contraction.

Evidence that price pressures within the Eurozone’s powerhouse economy remain lacklustre, limiting inflation, would offer the GBP/EUR exchange rate a rallying point.

A weakening of French consumer confidence may also put a dampener on the Euro, highlighting the risk of a slowdown facing the wider currency union.

Louisa Heath

Contact Louisa Heath