Pound Euro (GBP/EUR) Exchange Rate Fluctuates on Mixed Data, Coronavirus Developments

GBP/EUR Exchange Rate Wavers on Mixed PMI Data, German Growth Concerns

The Pound (GBP) is rangebound against the Euro (EUR) this morning as data has printed mixed for both currencies. The Euro has fallen against the majority of its peers as a dovish report from Germany’s Bundesbank raises concerns over economic recovery.

At the time of writing, the Pound is trading at €1.1696, resettling around today’s opening levels.

Euro (EUR) Faces Headwinds as Bundesbank Report Inspires Concern

The Euro has come under pressure on mixed Eurozone data and dovish messaging from officials, inspiring bearish trading.

Yesterday’s PMI Flashes for Germany and the Euro area printed lower than expected, with the exception of the DE services flash, which fell from last month despite new business continuing to grow at a fast pace.

The data subdued the single currency into today’s session. Although Germany’s GDP growth rate beat expectations this morning, a new report from the Bundesbank has muted EUR gains. The report suggests German economic growth could miss forecasts this year due to the Delta variant of the coronavirus.           

The Deutsche Bundesbank cautions that ‘There is uncertainty surrounding the further economic impact of the pandemic. For example, the Delta variant and vaccination slowdown could result in tighter restrictions… this could then weigh more heavily on the economy in the fourth quarter.’

Euro investors have additional reasons to trade cautiously: the European Central Bank’s Isabel Schnabel gave an interview on Sunday iterating that ‘The ECB is not worried about current high inflation rates… Current high inflation rates do not mean that monetary policy will be tightened soon.’

This will be a blow to traders hoping to see monetary policy change in the near term.

Pound (GBP) Trends Lower as Lack of Data Renders Sterling Vulnerable

The Pound has also fallen against the majority of its peers this morning as a lack of UK data exposes Sterling to downside pressure.

Yesterday’s PMI flashes put initial pressure upon the Pound, as services data missed forecasts. August’s manufacturing PMI flash edged down to 60.1 from 60.4 in July: the slowest growth in factory activity in 5 months.

Into today, Pound sentiment has been affected by coronavirus worries, as the UK reported another 31,914 cases yesterday – an advance on the two weeks previous. The number of people admitted to hospital with coronavirus has also reached an August high.

Meanwhile, scientists remain divided over children’s vaccines, debating whether the UK should follow other countries and begin vaccinating younger children before pupils return to school.

The hesitancy of the UK government’s advisers (the JCVI) over the decision has inspired ill will amongst those who believe the decision should have been made weeks ago.

GBP/EUR Exchange Rate Forecast: Euro to Lift on Ifo Optimism?

Looking to tomorrow, Germany’s Ifo business climate index is likely to drive movement in the Pound Euro Exchange Rate.

Analysts predict a slight decline in business confidence; if the index exceeds expectations, however, the Euro could find enough support to regain yesterday’s opening levels.

Meanwhile, Covid developments are likely to inspire movement depending upon case numbers and vaccination progress.