Pound Euro Exchange Rate Trades Erratically as Eurozone and UK Economies Struggle
The Pound Euro (GBP/EUR) exchange rate is wavering amid slumping German business and UK consumer confidence.
At time of writing the GBP/EUR exchange rate is trading around €1.1669, relatively unchanged from the morning’s opening levels.
Euro (EUR) Undermined by Downbeat German Business Confidence
The Euro (EUR) is under renewed pressure this morning as the latest Ifo Business Climate Index for Germany declined for the fourth consecutive month. Highlighting the ongoing struggles in Europe’s biggest economy, the Euro slipped.
Furthermore, company’s assessments of their own current economic situations have deteriorated to the lowest level since the height of the pandemic in August 2020. Looking ahead, firms are even less optimistic and haver taken a more negative turn from the previous month.
However, there is growing belief that European Central Bank (ECB) President Christine Lagarde could provide some relief to the Euro. With Lagarde due to speak at today’s Jackson Hole Symposium in Wyoming, a hawkish tone could lift the flagging single currency. Economists at ING believe the ECB chief will continue her data-driven approach and hardline approach to bringing inflation down:
‘Our perception is that Lagarde is unhappy with the market’s recent scale-down of rate expectations in the Eurozone (a September hike is only 40% priced in), and she may prefer to keep overlooking some evidence of worsening growth and stick with a pure data-dependent approach.
‘Ultimately, if inflation surprises on the upside, the chances of a hike in September would rise quite significantly in our view, especially given the deteriorating growth outlook, which means that could be the ECB’s last chance to raise rates.’
Pound (GBP) Under Pressure from Uncertain Economic Outlook
Meanwhile, the Pound (GBP) continues to languish on mounting economic fears. A string of downbeat data and the double-edged sword of further tightening is keeping a lid on Sterling.
Adding further pessimism is the latest consumer confidence indicator from GfK. Despite a better-than-expected reading as sentiment improved modestly, the mood remains low. Joe Staton, Client Strategy Director at GfK commented:
‘Consumer confidence regained momentum this month with a welcome five-point improvement. While the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the UK.’
Pound Euro Forecast: Hawkish Lagarde to Boost the Euro?
Looking ahead to this evening, the Pound Euro exchange rate could see the Euro recover strength if ECB President Christine Lagarde remains hawkish in her speech at the Jackson Hole Symposium.
Meanwhile, the Pound will be left to languish amid relentless economic headwinds amid a lack of data. With the economic outlook remaining bleak, despite the actions of the Bank of England (BoE), Sterling could stumble further.