Pound Euro (GBP/EUR) Exchange Rate Wavers amid ‘Partygate’ and Poor German Data
(Updated 15:30, 25/5/22) The Pound Euro (GBP/EUR) exchange rate fluctuated today as GBP investors reacted to the ‘partygate’ report.
Sue Gray’s long-delayed report into illegal parties at Downing Street rocked the Pound (GBP), causing it to slip against most of its major rivals.
The scandal has plagued Prime Minister Boris Johnson’s premiership since it hit the headlines back in November. The question today was whether Gray’s report would be damning enough to trigger a vote of no confidence.
So far, Johnson seems to have survived the report’s release. But the political uncertainty has caused some turbulence in the Pound.
However, poor data from Germany weighed on the Euro (EUR), allowing GBP/EUR to waver higher overall.
Consumer confidence in Europe’s largest economy remains close to a record low heading into June. Soaring prices and Russia’s ongoing invasion of Ukraine are the key factors behind the gloomy mood.
The Pound Euro pair has climbed from €1.1706 to €1.1745 today, fluctuating in the process. However, it still hasn’t recouped all of yesterday’s losses.
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Pound Euro (GBP/EUR) Exchange Rate Rises amid Poor German Data
The Pound Euro (GBP/EUR) exchange rate is regaining ground today, buoyed by a moderately risk-on market mood.
The single currency, meanwhile, is facing some selling pressure after German consumer morale remained close to a record low.
Pound (GBP) Recovers amid Risk-On Mood
The Pound (GBP) is rising today, extending its overnight recovery. Yesterday, the Pound Euro pair tumbled following a sharp slowdown in UK service-sector growth. However, Sterling has managed to recoup much of yesterday’s losses.
The rebound initially came amid an upbeat mood in Asian markets, which supported the risk-sensitive Pound. In addition, a corrective pullback in the Euro (EUR) seems to have lent Sterling some strength.
GBP’s upside seems limited, however, as the currency faces continued political and economic headwinds.
Euro (EUR) Dented by German Consumer Confidence
Meanwhile, the Euro is on the back foot today. The single currency snapped its two-day winning streak after hitting a 12-day high against the Pound, with GBP/EUR seemingly entering oversold conditions.
This morning, the latest German consumer confidence report seems to have disappointed EUR investors. Markets were perhaps hoping for an upbeat surprise after German business confidence unexpectedly improved on Monday. However, consumer confidence in Europe’s largest economy remains near a record low.
The European Central Bank’s (ECB) recent hawkish shift may be underpinning the Euro today and preventing further losses. This week, ECB President Christine Lagarde has set the stage for rate hikes in July and September, thereby lifting the Euro.
Pound Euro Exchange Rate Forecast: Sterling’s Recovery to Falter?
Turning to the rest of the session, we may see GBP/EUR’s recovery run out of steam.
The Sue Gray ‘partygate’ report is due out today, which could cause political headwinds for the Pound. Depending on what the report contains, Boris Johnson may face renewed calls to resign. In the most extreme case, Johnson could face a vote of no confidence. Such political uncertainty would likely hurt GBP.
Additionally, the UK faces ongoing economic concerns. Yesterday’s PMI miss was the latest warning sign that the UK economy is struggling. Soaring inflation, falling real wages, higher taxes and rising interest rates are all squeezing UK households and businesses alike. This bleak outlook could begin to weigh on GBP again today.