ExchangeRates.org.uk - At the time of writing GBP/EUR was trading at €1.1838, up approximately 0.2% from Tuesday’s opening rate. The Euro (EUR) faced headwinds on Wednesday following some downbeat releases from the Eurozone’s largest economy. The publication of Germany’s finalised GDP report confirmed that the economy shrank by 0.1% throughout the second quarter, as private consumption and gross fixed capital formation deteriorated throughout the summer months. The release served to deter investor interest in the common currency, amid signs of a sluggish German economic recovery persist.
Carston Brzeski, Global Head of Macro at ING, commented: ‘The German economy had started the year with some optimism. The truth, however, is that GDP growth in the first quarter was driven by the mild winter weather and a downward revision of fourth quarter GDP. Therefore, it was not what we would call a sustainable and healthy growth story. With disappointing second-quarter growth and almost all confidence sentiment indicators pointing south, the German economy is currently back where it was a year ago: stuck in stagnation as the growth laggard of the entire eurozone.’
Elsewhere, the latest GfK consumer confidence indicator in Germany missed forecasts. The indicator dropped to -22 in September, falling from a downwardly revised -18.6 in the previous month and missing forecasts of a slight uptick to -18. Marking the lowest reading since May, the data served to reinforce concerns about the health of the Eurozone’s largest economy, reviving worries that Germany remains the ‘sick man of Europe’.
Pound (GBP) Exchange Rates Pressured by Weak Retail Activity
The Pound (GBP) struggled to garner investor interest on Tuesday following the Confederation of British Industry’s (CBI) latest distributive trades report. The CBI’s monthly retail sales balance missed forecasts in August, rising from -43 to -27, falling significantly below market projections of -11. The mid-tier data pointed to ongoing weakness in British retail activity, signalling that that UK consumers continue to grapple with cost-of-living woes.
Martin Sartorius, Principal Economist at the CBI, said: ‘Retail sales volumes continued to disappoint in the year to August, with contractions also being seen in the wholesale and motor trade sectors. Retailers reported increased caution regarding their investment and hiring plans, which seemed to reflect concerns about persistently weak demand conditions. Although households seem to still be feeling the pinch from the cost-of-living crisis, firms should gradually begin to see some tailwinds from consumers’ rising real incomes.’
However, a cautiously upbeat market sentiment coupled with pared back Bank of England (BoE) interest rate cut bets served to lift the increasingly risk-sensitive Pound against its safer rivals.
Pound Euro Exchange Rate Forecast: German Inflation in Focus
Looking ahead, a data-light session on Wednesday could see the Pound Euro exchange rate driven primarily by global risk dynamics, with any upbeat trade likely to weigh on the safe-haven single currency. Beyond this, the next notable release arrives on Thursday morning, as Germany’s latest inflation data is pulled into focus. The German consumer price index is forecast to ease to 2.1% in August, dipping from a previous 2.3%. Could signs of rapidly cooling inflation in the Eurozone’s largest economy reinforce speculation of further European Central Bank (ECB) interest rate cuts in the near term?
This content was originally published on ExchangeRates.org.uk
