Fading Impact of UK Consumer Confidence Index Leaves Pound Sterling Euro (GBP/EUR) Exchange Rate Softer
As the impact of Friday’s improved UK consumer confidence index faded the Pound Sterling to Euro (GBP/EUR) exchange rate came under renewed pressure.
In spite of the modest uptick in December’s GfK consumer confidence index Pound Sterling (GBP) struggled to hold onto a positive footing for long.
Lingering anxiety over the increased risk of a cliff-edge Brexit saw GBP exchange rates return to the back foot this morning, struggling thanks to lower trading volumes ahead of the Christmas break.
Without the support of any fresh UK data releases the Pound looks set to remain out of favour in the near future, dragging the GBP/EUR exchange rate further from its former highs.
Rising German Import Prices Lift EUR Exchange Rates
The mood towards the Euro (EUR) improved this morning thanks to a better-than-expected set of German import price index figures.
As the monthly price index jumped from -0.1% to 0.5% this suggests that inflationary pressure within the Eurozone’s powerhouse economy could pick up in the months ahead.
Stronger signs of inflation may encourage the European Central Bank (ECB) to maintain a neutral policy bias in the early months of 2020, limiting the risk of further Euro weakness.
If the ECB finds incentive to leave monetary policy on hold for longer, avoiding further loosening measures, EUR exchange rates could make solid gains across the board.
German Retail Sales Rebound Forecast to Boost Euro Demand
Looking ahead to next week, the Euro could find renewed support on the back of November’s German retail sales figures.
After the sharp -1.9% monthly contraction seen in October investors are hoping for a solid rebound in consumer spending, pointing towards a greater level of domestic confidence.
While the German manufacturing sector appears set to remain a significant drag on growth in the fourth quarter any signs of resilience consumer spending could help to limit the downside potential of EUR exchange rates.
If the Eurozone’s powerhouse economy can avoid suffering a fresh loss of momentum in the fourth quarter this may encourage the Euro to trend higher across the board.
GBP/EUR Exchange Rate Upside Potential Limited Thanks to Brexit Worries
Political worries look set to keep the GBP/EUR exchange rate under pressure for the foreseeable future, meanwhile.
With markets still lacking a degree of clarity over the UK’s future relationship with the EU a sense of Brexit-based anxiety seems set to weigh on the Pound in the weeks ahead.
As long as the risk of a potential cliff-edge Brexit persists GBP exchange rates are likely to stay on the back foot, particularly in the absence of fresh UK data releases.
Until markets see evidence of greater resilience within the UK economy, defying recent political uncertainty and Brexit jitters, the GBP/EUR exchange rate may struggle to gain any particular ground.