Pound Euro (GBP/EUR) Exchange Rate Remains Flat as German Consumer Morale Slides to Three-Month Low

Pound Euro Exchange Rate Rangebound amidst drop in German Household Sentiment 

The Pound Euro (GBP/EUR) exchange rate continues to trade in a narrow range this morning, following the publication of Germany’s latest consumer confidence index. 

At the time of writing the Pound Euro exchange rate is trading at around €1.1683, virtually unchanged from this morning’s opening rate. 

Euro (EUR) Muted as German Consumer Confidence Weakens 

The Euro (EUR) is struggling to find momentum this morning, after data from Germany showed that the outlook amongst consumers in the Eurozone’s largest economy is deteriorating

Gfk forward looking consumer confidence index dropped from –0.4 to –1.2 in September, the indexes worst reading in three months and below the drop to –0.7 which was forecasts. 

The drop in consumer morale appears to be primarily driven by anxiety over the Delta variant of the coronavirus and the potential for new restrictions to be imposed in the coming months. 

Rolf Bürkl, consumer expert at GfK, comments: 

‘Significant higher incidence values, a slowdown in vaccination momentum, and discussions about how to deal with unvaccinated individuals in the future have caused noticeable uncertainty among consumers in Germany.

‘They fear that restrictions could even be tightened again. This is obviously depressing consumer sentiment right now.’

Relatively speaking, the drop in consumer morale is fairly minor, with the index still well above the lows struck in the first quarter of 2021, which has helped to limit the pressure on the Euro this morning. 

Pound (GBP) Subdued amid UK Labour Shortage Concerns 

At the same time, the Pound (GBP) is also rangebound this morning as Sterling sentiment is suppressed by concerns that a labour shortage could curtail the UK’s economic recovery in the second half of 2021. 

A quarterly survey from the Confederation of British Industry (CBI), has highlighted how the difficulty in finding candidates to fill roles, has resulted in increased pessimism from consumer facing businesses. 

The survey revealed business optimism has dropped significantly from the last reading in May, with companies citing labour shortages as a key issue. 

As a result many consumer-focused firms fear that profits could decline in the last quarter of the year. 

Pound Euro Exchange Rate Forecast: ECB Minutes in Focus for EUR Investors 

Still to come today we have the publication of the minutes from the European Central Bank’s (ECB) July policy meeting. 

These could send the Pound Euro (GBP/EUR) exchange rate higher in the second half of the week as these are likely to reaffirm the ECB’s current dovish bias

Meanwhile, in the continued absence of any notable UK data releases, we may see Sterling sentiment continue to face headwinds as a result of the worrying rise in domestic coronavirus cases.