GBP/EUR Exchange Rate Edges Higher as Germany’s Lockdowns Weigh on Consumer Morale
The Pound to Euro exchange rate rose today, with the pairing currently fluctuating around €1.13.
The Euro struggled today following the release of Germany’s GfK Consumer Confidence report for February, which dropped sharply from -7.5 to -15.6.
Hardly surprising that consumer confidence in Germany declined sharply amid renewed and extended lockdowns. However, consumer expecations are also down, both regarding economic outlook and income´expectations. German recovery depends on a rebound in optimism in coming months pic.twitter.com/oFnZ6h3vYL
— Ulrik Harald Bie (@UlrikBie) January 27, 2021
Rolf Bürkl, a consumer specialist at GfK, commented on the report:
‘The closure of the restaurant trade and large portions of the retail sector in mid-December 2020 has had a similarly damaging effect on consumer spending as that of the first lockdown last spring.’
‘Consumer sentiment is facing difficult challenges. If it is to recover sustainably, infection rates will need to decrease more than they have to date so that the measures can be relaxed significantly. This means that we will need to wait a while before we see the recovery that many had been hoping for this year.’
Yesterday also saw Christine Lagarde, the European Central Bank’s (ECB) President, comment that the Eurozone’s economic recovery had been delayed but not derailed.
As a result, today’s German consumer morale has dampened confidence in the Eurozone’s economy, which appears to be suffering from a worse-than-expected blow from the Covid-19 pandemic.
Italy’s political woes in the form of the resignation of Prime Minister, Giuseppe Conte, has also weighed on confidence in the single currency.
Pound Rises as UK Covid-19 Cases Continue to Fall While Vaccination Numbers Increase
The Pound rose today despite news that the property website, Zoopla, reporting that UK property listings were down by -12%, while house prices are at a 4-year high.
Richard Donnell, the research and insight director at Zoopla, said:
‘The housing market momentum built up in the second half of 2020 has rolled into early 2021, despite a spike in the pandemic and a third lockdown. Sellers are more cautious however and appear to be waiting for case numbers to drop much further before listing their home, or until we see a return to tier-based restrictions.’
Meanwhile, the UK’s daily Covid-19 cases continue to drop, with today’s 20,089, down by -13,266 against last week’s reading.
Daily Covid-19 vaccinations are also rising, with today seeing +75,681 more vaccines than the previous week.
Could Downbeat Eurozone Consumer and Business Morale Drag Down the Single Currency?
Euro traders will be awaiting tomorrow’s release of the latest Eurozone Consumer Confidence and Business Climate data for January.
If this continues to paint a bleak picture for the Eurozone’s economic outlook, then we will see EUR suffer.
Tomorrow will also see the release of the flash German Consumer Price Index for January.
Any indications that the Eurozone’s largest economy is struggling to recover from the Covid-19 pandemic would be EUR-negative.
EUR traders will also be awaiting tomorrow’s speech from Isabel Schnabel, a member of the ECB’s executive board.
If she is notably downbeat in her outlook for the bloc’s economy, then the EUR/GBP exchange rate would fall.
The GBP/EUR exchange rate will continue to be driven by the UK’s coronavirus situation.
Any indications that Covid-19 infection rates are continuing to drop would be GBP-positive.
However, if Downing Street hints at any extensions to the nationwide lockdown, then we would see Sterling shed today’s gains.