Pound Euro (GBP/EUR) Exchange Rate Falls on UK Finance Worries and Positive German Data
The Pound Euro (GBP/EUR) exchange rate has lost ground this morning after UK public sector borrowing came in higher than expected and upbeat German data boosted the Euro (EUR).
At the time of writing, the GBP/EUR exchange rate is trading at around €1.1434, down 0.3% from today’s opening levels.
Pound (GBP) Falls following Government Borrowing Figures
The Pound (GBP) dropped this morning as UK public sector borrowing came in higher than expected.
The British government borrowed £22bn in November, far higher than the expected £13bn and a record amount for the month, as expensive policy interventions and soaring inflation squeeze the public finances.
The latest data underlines the government’s new approach to tighter fiscal policy. After the releases, Chancellor Jeremy Hunt repeated his assertion that the Treasury must make ‘tough decisions’ to the get the public finances back on sustainable footing.
The government has been resisting calls from public sector workers across different services for better pay offers as double-digit inflation erodes real wages. NHS staff, firefighters, educators, rail workers and many others are taking industrial action to demand better pay.
Today’s borrowing figures are likely to strengthen the government’s resolve in refusing to improve pay offers.
Euro (EUR) Enjoys Upbeat German Data
The Euro, meanwhile, is strengthening against Sterling following some fairly upbeat German data.
Germany’s GfK consumer confidence index improved for the third consecutive month. The gauge rose from -40.1 to -37.8 heading into January, beating expectations of -38.
Rolf Buerkl, Consumer Expert at GfK, said:
‘With the third rise in a row, the consumer climate is slowly working its way out of the trough. The light at the end of the tunnel is getting a little brighter’.
With morale improving in Europe’s largest economy, EUR investors are hopeful that the outlook for the wider Eurozone may also brighten.
Pound Euro Exchange Rate Forecast: CBI Sales Data in Focus
Looking ahead, the Confederation of British Industry’s (CBI) distributive trades survey could impact the Pound. Economists expect another decline in UK retail sales, which could add to growing concerns about the country’s economy.
Meanwhile, any fresh headlines about industrial action in the UK could also weigh on Sterling.
Turning to the Euro, a lack of economic data through the remainder of today’s session may see EUR affected by risk appetite and the currency’s negative correlation with the US Dollar (USD). If the market mood sours, the safer Euro could enjoy an upside. However, a stronger US Dollar could limit the common currency’s gains.