GBP/EUR Exchange Rate Slumps on Stronger-than-Expected ZEW Surveys
The Pound to Euro (GBP/EUR) exchange rate has fallen sharply today as EUR investors welcome the publication of the Eurozone’s latest ZEW surveys.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1342, down nearly 1% from this morning’s opening levels.
Euro (EUR) Rallies on Surprisingly Positive ZEW Surveys
The Euro (EUR) is on the rise today in response to a surprisingly upbeat ZEW index from Germany and the rest of the Eurozone.
According to the latest ZEW surveys investor confidence in Germany mounted a surprise come back this month, with the economic sentiment index bouncing up from –49.5 to 28.2 in April easily outpacing expectations for another gloomy reading of –42.3.
A similar jump was seen in the survey for the wider Eurozone which surged from –49.5 to 25.2 against expectations for a deeper slump to –62.
The uptick comes as Germany and other Eurozone countries start to make tentative steps towards reopening their economies, with an easing of lockdown restrictions seeing millions of Europeans in ‘non-essential’ roles return to work.
However, some analysts warn that today’s figures are unlikely to accurately reflect the economic impact of the crisis.
Carsten Brzeski, Chief Economist at ING Germany, comments:
‘Coming from a very low point, it is no surprise that the future looks more optimistic.
‘After March was the sharpest monthly drop ever, today’s increase is the largest monthly increase ever. In all honesty, this number is too good to be true. It probably reflects the stock market rally of the last few weeks, central bank and government action as well as a good portion of optimism that up to now all viruses eventually ended with a U- or V-shaped recovery.
‘Today’s ZEW index is another data point on the long road to fully grasp the magnitude of the Covid-19 crisis.’
Despite these reservations, the ZEW survey has been broadly positive for EUR exchange rates today.
Pound (GBP) Tumbles on BoE Warning
At the same time, the Pound (GBP) is under fire this afternoon following comments from the Bank of England’s (BoE) Chief Economist Andy Haldane.
In a podcast released on Tuesday Haldane warned the UK economy faces some tough times ahead.
Following a ‘modest contraction in the first quarter’ Haldane suggests that the second quarter ‘ is likely to bring a very much sharper contraction, seen across the world’.
Haldane also warned that the recovery may take some time as well as ‘People might be reluctant to spend too vigorously or go out and socialise immediately after coronavirus restrictions are relaxed.’
GBP/EUR Exchange Rate Forecast: Virtual EU Summit as Chance for the EU to Clear the Air
Looking ahead, the focus for investors in the second half of the week is likely to be on the EU summit of leaders being held via teleconference on Thursday.
With the coronavirus pandemic posing significant questions over the future of the EU, EUR investors will be looking to leaders to project unity and show that members are coordinating their response to the crisis.
Should the EU summit fail to alleviate some of the tensions which have arose in recent weeks its likely we could see the Pound to Euro (GBP/EUR) exchange rate strengthen.
Meanwhile, the publication of the UK’s latest CPI figures could limit the appeal of the Pound tomorrow on forecasts for a sharp drop in inflation last month.