Pound Euro (GBP/EUR) Fluctuates as German Business Confidence Improves
The Pound Euro (GBP/EUR) exchange rate is subdued this morning as the German Business Climate index improves, allaying recession fears.
At time of writing, the GBP/EUR exchange rate is around €1.1349, relatively unchanged from this morning’s opening levels.
Euro (EUR) Propped up by Improving Business Optimism
The Euro (EUR) is enjoying modest gains this morning as moods improved in Europe’s largest economy. The German IFO Business Survey printed to mixed results, but headline optimism improved.
Despite the energy crisis, high inflation, and the ongoing effects of the Ukraine invasion, there are signs that the German economy is improving. However, ING economist Carsten Brzeski has warned that despite the optimism, recession fears still remain:
‘The current assessment component dropped for the second month in a row and remains weak. It is expectations which surged and they have now improved for the fifth month in a row.’
Elsewhere, the Ukraine-Russia conflict continues to weigh on market sentiment, and the Euro. Capping any further gains today are fears that the conflict could escalate. With US President Joe Biden making a surprise visit to Kyiv, and talks of China supplying Russia with lethal aid, investors are spooked.
Pound (GBP) Supported by Increased Interest Rate Hike Bets
Meanwhile, the Pound (GBP) appears to be losing momentum from yesterday’s rally. As PMIs surprised to the upside and bolstered interest rate hike bets, a lack of economic data could see Sterling trim its gains further.
However, optimism surrounding an amicable resolution to the Northern Ireland protocol appears to be subdued, weighing on the Pound. After Prime Minister Rishi Sunak flew to Belfast to strike a deal, Tory backlash over the proposed deal has poured cold water on the situation. But the European Commission vice-president Marš Šefčovič is still hopeful, and claims a deal is close:
‘We clearly can see the finishing line, but in such a negotiation, being close doesn’t mean being done.’
Pound Euro Exchange Rate Forecast: BoE Speeches to Rescue the Pound?
Looking ahead, the Pound Euro exchange rate could see further movement with a series of speeches from BoE members. In light of stronger-than-expected economic data, any comments on if the central bank will continue their tightening cycle could lift Sterling.
Meanwhile, further developments in Ukraine could influence the Euro. With fears of Russia escalating the conflict, market sentiment could waver, exerting pressure on the single currency.