Pound Sterling Euro (GBP/EUR) Exchange Rate Rises as Bloc’s Confidence Slumps to Decade-Low
UPDATE: The Pound Euro (GBP/EUR) exchange rate rose by around 0.5% this afternoon, leaving the pairing trading at around €1.1380.
This afternoon, data showed that Eurozone consumer confidence slumped to -22.7 in April, the largest-ever drop.
This was the lowest confidence in the bloc has fallen since March 2009, and the third-lowest reading in the history of the survey.
The data reflects the impacts of the lockdown, as no Eurozone country has introduced stricter measures since the data was collected.
Pound Sterling Euro (GBP/EUR) Exchange Rate Edges Higher on Reports of Coronavirus Vaccine Testing
The Pound Sterling Euro (GBP/EUR) exchange rate edged higher this morning, leaving the pairing trading at around €1.1358.
The Pound was able to make some gains against the single currency on Wednesday as human tests on two coronavirus vaccines are set to begin testing in the UK on Thursday.
Meanwhile, the single currency remained under pressure ahead of tomorrow’s EU leader’s summit.
Reports have suggested the divisions between EU finance minister continue over the details of the bloc’s stimulus package.
One of the key sticking points is whether or not joint coronavirus bonds will be used to finance the ‘emergency fund’.
However, on Tuesday it was reported that Italy’s Prime Minister Conte is prepared to accept a French and Spanish compromise which would not lead to any further treaty changes.
Cautious British Shoppers Send UK Inflation Lower
Data revealed that the UK’s inflation rate fell in March after oil prices slumped and the coronavirus pandemic escalated.
Official data showed that there was a fall in clothing and footwear prices showing that British shoppers were becoming increasingly cautious.
It is expected March’s fall from 1.7% to 1.5% will be the start of a sharp slump in inflation.
According to the Office for National Statistics (ONS), the decline in clothing and footwear prices was the largest drag on the Consumer Price Index (CPI).
In a statement the ONS noted:
‘Prices usually rise between February and March, and this year’s fall is the first since 2015 and only the second since the start of the constructed (inflation) series in 1988.’
Today’s inflation was far below the Bank of England’s (BoE) target of 2%, and on Monday, Deputy Governor, Ben Broadbent said inflation was likely to fall below 1% in the coming months.
Commenting on this, Capital Economics’ UK economist, Andrew Wishart noted:
‘The disinflationary pressure of weak demand in the aftermath of the coronavirus recession due to the fall in employment and consumers remaining cautious will add to the downward influence from very low energy prices.’
However, this did little to stop the Pound rising agianst the Euro.
Pound Euro Outlook: Coronavirus and Eurozone Confidence in Focus
Looking ahead to this afternoon, the Euro (EUR) could suffer further losses against the Pound (GBP) following the release of Eurozone confidence data.
If April’s flash consumer confidence slumps anywhere close to estimates, it would take the index to its lowest level since 2013.
Meanwhile, on Thursday EUR could fall further following the release of GfK’s consumer confidence for the bloc’s largest economy.
If German confidence plummets due to the coronavirus pandemic, it will send the Pound Euro (GBP/EUR) exchange rate higher.