EUR GBP Still Weak After European ZEW Data Slumps

The EUR GBP exchange rate was trading near the lows for the year after German and European sentiment showed businesses were more negative than analysts had expected. Virus uncertainty and the potential for a slowdown in Chinese imports were impacting the euro across the board.

The EUR to GBP rate is trading at 0.8460 after seeing new lows for the year yesterday at 0.8450.

ZEW sentiment data weighs on the euro

The German ZEW sentiment numbers for August showed that the business mood index dropped more than expected to 40.4 from 63.3, with analysts expecting 56.7.

The Eurozone also saw a drop in its ZEW Economic Sentiment for August with a reading of 42.7 for July, compared to 61.2 in June and forecasts for 72.0.

ZEW President Achim Wambach said: “Expectations have declined for the third time in a row. This points to increasing risks for the German economy, such as from a possible fourth covid-19 wave starting in autumn or a slowdown in growth in China.”

“The clear improvement in the assessment of the economic situation, which has been ongoing for months, shows that expectations are also weakening due to the higher growth already achieved,” Wambach added.

The German economy has data ahead today once more with the final reading for inflation in July and that should confirm the jump to 3.8% from 2.3%. A higher revision would add to the recent pressure on the ECB to discuss unwinding its stimulus measures.

UK fatalities rise despite 75% vaccinations

The UK has reported the highest level of virus-linked fatalities since March with over 23,000 cases and over 140 deaths.

The figures come despite the news that 75% of the country is said to have been fully vaccinated. The country is still enjoying a lifting of legal restrictions, but a continued move higher in cases towards the flu season could take the wind out of the pound’s sail once more.

Boris Johnson hailed the vaccine news as a “huge national achievement”.

But Oxford Vaccine Group director Professor Sir Andrew Pollard warned that herd immunity is “not a possibility”.

Pollard said that while vaccines might “slow the process” of transmission, they currently cannot stop the spread completely. That was not what people were told when it was said that the vaccines were up to 98% effective and the UK is still at risk despite the large rollout.

The pound sterling has been advancing against many global currencies due to the pace of the vaccine rollout and the full reopening. That could see sterling stumble again at the yearly highs if the path forward went into reverse gear again.

The EUR v GBP trades just below the previous yearly low set in early-April and will look to set a price double bottom there. Today’s German inflation and tomorrow’s GDP from the UK should determine which direction the pair goes in for the rest of the week.

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