EUR GBP Moves Higher Despite Weak German Confidence

The EURGBP exchange rate was 0.30% higher on Thursday despite a weaker than expected German consumer confidence figure. German business owners and consumers have both been hesitant in recent sentiment figures, but traders are hopeful that the economy will improve in the third quarter. The pound is seeing weakness due to Britain having the highest virus rates in Europe.

The EUR to GBP rate is trading at 0.8580 and could head for the 0.8600 level by next week.

German consumer confidence weakens

The latest consumer confidence figures for the German economy came in lower on Thursday.

The Gfk consumer confidence number was expected to come in at -0.7 but came in at -1.2%. The mood among German consumers has dampened due to higher inflation and rising virus cases.

“Prices have been rising rapidly since the middle of this year. This has a dampening effect on the consumer mood,” GfK’s analyst Rolf Buerkl said.

Inflation has been persistent with Germany’s annual consumer prices rising 3.1% in July, which was a 13-year high and is fuelling fears that the increased cost of living will persist.

“An increase in coronavirus infections and a slower pace of vaccinations have also hit consumers’ expectations for the economy and affected their propensity to buy,” Buerkl added.

Germany added over 11,000 new coronavirus infections on Wednesday, according to the Robert Koch Institute. The country also said that 59% of the population are fully vaccinated with around 64% having received at least one dose.

There will be no more data this week and traders have seen the slowdown in sentiment this week but are moving the dial on the euro with a focus on Germany’s higher revision to GDP earlier in the week. Investors are looking towards an improvement in German GDP in the second half of the year.

Treasury rubbishes SNP claims of slow recovery

The Treasury has hit back at the SNP’s claims that the UK had the weakest economic recovery of any country in north-west Europe since the financial crash.

The SNP claimed independence for Scotland was “essential” because Tories had poorly handled the UK economy badly since coming to power in 2010. The party claimed a cumulation of damaging decisions at Westminster since 2008 had hurt the economic recovery, including a decade of Tory and Labour austerity cuts and Brexit.

A Treasury source said: “This is total nonsense, latest figures show the UK having the fastest quarterly growth rate among the G7 nations.”

“Our economy is on the mend and showing strong signs of recovery – thanks to our Plan for Jobs and successful vaccine programme,” they added.

A recent coalition between the Green party and the SNP in Scotland has raised the spectre of an independence vote again for Scotland. That is unlikely to be anytime soon though with both countries having a lot on their plate.

The EUR to GBP will now aim for 0.8600 with stronger resistance ahead at the 0.8700 level.

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