Pound Euro (GBP/EUR) Exchange Rate Dips even with Surprising German Data
The Pound Euro (GBP/EUR) exchange rate has lost ground this morning, even though Germany’s latest business climate index printed below market expectations.
At the time of writing, GBP/EUR is trading at €1.1600, down roughly 0.2% from this morning’s opening rate.
Euro (EUR) Firms despite Gloomy German Business Sentiment
The Euro (EUR) is trending higher against most of its peers this morning, despite an unexpected deterioration in German business sentiment.
The IFO business climate index reported an unexpected decline in business sentiment this month, with the index sliding to 86.4, the lowest in a three-month period, and missing market forecasts of a rise to 87.8.
Carsten Brzeski, Global Head of Macro at ING, comments on the latest German business climate result:
‘Today’s Ifo index reading brings the macro year for Germany almost to a close. It has been another turbulent year in which the economy seems to have been in permanent crisis mode.’
He continues:
‘Even if the worst of the weakening in sentiment seems to be behind us, the hard economic reality does not look pretty. In fact, the economy seems to be on track for another quarter of contraction in the final quarter of 2023 and even the start of 2024 does not yet look really promising.’
The recent data shows the risk of a recession in the Eurozone’s largest economy evidently remains, which could cap the Euro’s upside potential through the rest of the day.
Pound (GBP) Drifts Lower amid Lack of UK Data
The Pound (GBP) is on the back foot today against a number of its peers, as a clear lack of any fresh UK data leaves GBP vulnerable to market sentiment and risk dynamics.
While Sterling faces resistance due to this morning’s cautious market mood, hawkish comments from Bank of England (BoE) policymaker, Ben Broadbent may be helping to limit the Pound’s losses.
In a speech to the London Business School, Broadbent explains the difficulties of setting monetary policy in times of uncertainty and goes on to say that a deeper slowdown in wage inflation is needed before decisions on cutting interest rates can be made.
Pound Euro Exchange Rate Forecast: Minimal Data to Drive Currencies
Looking ahead, data is thin on the ground for the Pound until Wednesday, which will see the release of the UK’s latest inflation report.
Analysists predict that headline inflation is set to cool, expecting a drop from 4.6% in October to 4.4% in November. Similarly, core inflation is also expected to fall, from the last reading of 5.7%, down to 5.4%. Should the results print as expected, this could undermine Sterling moving forward.
Turning to the Euro, there is also a lack of any fresh Eurozone data until Wednesday, which will see the release of the latest German consumer confidence index.
The index previously printed at -27.8, with forecasters predicting a slight increase to -27 for this month’s reading. Should the results come in as forecast or beat expectations, this could lend the Euro some support.