EUR to GBP Exchange Rate Dips as German Confidence Data Shows Limited Signs of Recovery

January 27, 2020 – Written by Toni Johnson

While Bank of England (BoE) interest rate cut speculation persists and demand for the Pound is limited, the Euro to British Pound (EUR/GBP) exchange rate continues to see weak performance today. The Euro has been lacking in support lately, and this morning’s Eurozone data has done little to change that. For now, Euro and Pound investors are anticipating major Eurozone data due in the coming sessions, as well as the Bank of England’s (BoE) policy decision on Thursday.

Last week’s Pound recovery pushed EUR/GBP down from 0.8521 to 0.8434 throughout the week. EUR/GBP also touched on a monthly low of 0.8402 before markets on Friday.

While EUR/GBP movement has generally been mixed and limited since markets opened today, the pair is being kept under pressure near the week’s opening levels. At the time of writing, EUR/GBP trends just below the week’s opening levels near the region of 0.8425.

Investors are hesitant to buy the Euro amid a lack of fresh support for the currency.

EUR Exchange Rates under Pressure as Eurozone Data Shows Limited Signs of Recovery

Last week saw Euro investors disappointed at the European Central Bank’s (ECB) relatively cautious tone on the Eurozone’s economic outlook. However, this week’s data has thus far indicated that the ECB may be right to maintain caution.

Despite signs of recovery in other Eurozone data lately, it has been mixed overall, not giving markets enough to confidently believe that the economy will rebound this year.

Today’s German business confidence stats from Ifo were the latest to keep markets uncertain over how the Eurozone economy will perform over the coming months.

Ifo’s stats fell short of forecasts in every notable print. The business climate report flowed to 95.9, current conditions only rose to 99.1, and expectations slowed to 92.9.

Ifo economists said the outlook remained positive, but other analysts indicated that those expecting a strong rebound soon may be disappointed. According to Jamie Rush from Bloomberg:

‘Manufacturing is recovering from a substantial shock. A big rebound remains unlikely while industry grapples with structural issues that take time to work through. But we expect Germany’s economy to expand slightly faster in 4Q than the 0.1% growth rate recorded in 3Q. And some further acceleration can be expected this year as sentiment improves.’

GBP Exchange Rates Avoid Losses amid Bank of England (BoE) Anticipation

Following last week’s strong Pound rally, the British currency’s movement has quietened in recent sessions.

UK PMI projections beat forecasts on Friday, but these were not strong enough to completely offset Bank of England (BoE) interest rate cut speculation.

With the possibility of a BoE rate cut this week still present, Sterling’s strength is limited while investors await major data and BoE news.

According to Jim Reid, Strategist at Deutsche Bank:

‘This (BoE) meeting follows a run of fairly weak economic data over the last few weeks but with last week’s strong employment data and better than expected flash PMIs confusing the picture,

Our economists have expected a cut for a good couple of months now but markets are closer to 50:50.’

Today’s UK finance mortgage approvals data was fairly low influence, and so Sterling investors remain hesitant to move on the currency as they anticipate the BoE decision set for Thursday.

EUR/GBP Exchange Rate Forecast: Key Data and Bank of England (BoE) Decision in Focus

Today’s German data ultimately had little major impact on the Euro’s movement, as there is still plenty of key Eurozone data due for publication in the coming sessions.

While tomorrow’s session will be fairly quiet, Euro investors are eagerly awaiting key data due from Wednesday through Friday.

German and French consumer confidence, as well as German import prices, will be published on Wednesday. Thursday will follow with German unemployment and Eurozone confidence, as well as German inflation stats.

However, Thursday’s biggest news will be the Bank of England’s (BoE) January policy decision.

Since BoE rate cut speculation rose in recent weeks, the tone the bank could take on Britain’s economy has become among the biggest concerns for Pound investors.

With last week’s UK data not strong enough to cause BoE rate cut bets to vanish, Thursday’s decision could be highly influential.

If the BoE cuts UK rates on Thursday or is more cautious about Britain’s outlook than hoped, the Euro to Pound exchange rate could see a strong late-week recovery as the Pound plunges.

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TAGS: Euro Pound Forecasts