Euro Pound (EUR/GBP) Exchange Rate Sinks as German Economic Sentiment Falls in February

February 18, 2020 – Written by John Cameron

EUR/GBP Exchange Rate Falls as German Economic Outlook Darkens

The Euro Pound (EUR/GBP) exchange rate fell by -0.4% today, with the pairing currently trading around £0.829 after Germany’s ZEW survey of economic sentiment for February plummeted below forecasts from 26.7 to 8.7.

ZEW President Achim Wambach was downbeat in his analysis, commenting:

‘The feared negative effects of the coronavirus epidemic in China on world trade have been causing a considerable decline of the indicator of economic sentiment for Germany… Expectations regarding the development of the export-intensive sectors of the economy have dropped particularly sharply.’

The Euro (EUR) has remained subdued due to a darkening economic outlook for the German economy, which is the largest in the Eurozone.

This month’s dimming economic sentiment survey has also confirmed fears that the bloc could face further stimulus measures from the European Central Bank next month.

Furthermore, due to rising concerns over the global economy, it is looking increasingly likely that China’s coronavirus outbreak could negatively impact the global supply chain and put pressure on Germany’s industrial sector.

GBP/EUR Exchange Rate Edges Higher as UK Joblessness Hits Record Low

The Pound (GBP) rose against the single currency following this morning’s release of December’s ILO unemployment rate, which fell to record lows of 3.8%, boosting confidence in the British economy for 2020.

Sophie Wingfield, Head of Policy at the Recruitment and Employment Confederation, commented:

‘[This is] great news for recruiters and the economy. Following a year of political and economic uncertainty, businesses are putting into action the ambitious hiring plans they had previously been cautious to press go on. The challenge now is to keep this momentum going.’

Some of Sterling’s gains were however held back by worse-than-expected UK average earnings for December, with the headline gauge dipping from 3.2% to 2.9%.

Post-Brexit developments have also continued to haunt British markets following comments from David Frost, Prime Minister Boris Johnson’s chief Brexit negotiator, who said that the UK would resist being aligned to the EU’s laws.

EUR/GBP Outlook: Could Sterling Continue to Rise on Improving Inflation Data?

Sterling investors will be looking ahead to tomorrow’s publication of January’s UK inflation report, which is forecast to rise from 1.3% to 1.6%. As a result, we could see the GBP/EUR exchange rate continue to rise as the UK’s economic outlook brightens for 2020.

Tomorrow will also see the release of January’s UK Retail Price Index. Any signs of improvement would also prove Pound-positive.

The EUR/GBP exchange rate will likely be driven by China’s coronavirus outbreak developments this week, with any further signs that this could have a negative impact on Germany’s economy weakening market appeal of the single currency.

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