EUR GBP Stumbles Ahead of 0.8600 Ahead of German Data

The EUR GBP exchange rate dropped on Monday after a test of 0.8600 looked likely. The pair will now await today’s confirmation reading on German GDP before further data this week from Europe’s largest economy. Consumer and PMI today showed that the initial surge in activity from the reopening in Europe may be dampening down a little.

The EUR to GBP rate is trading near 0.8550 ahead of today’s data release.

Consumers become more cautious in the Eurozone

Consumer confidence dropped in the Eurozone from -4.4 to -5.3 in August as early optimism about the reopening of eurozone economies fades. Concerns about the impact of the Delta virus variant seem to be weighing on the figure, but consumption is set to recover quickly

The consumer reading marks the second decline in a row after the June peak at -3.3, which was one of the highest confidence levels measured. The bloc also saw weaker PMI today on Monday, but traders are hopeful that the GDP growth in the third quarter will still be strong.

A report last week said employment is booming with the economic reopening which will boost income for the consumer. Higher inflation and concerns about the variant are headwinds for consumer optimism, the overall theme seems to be that despite the euphoria wearing off, consumer strength will translate into a continued strong recovery of household consumption.

Manufacturing PMI dipped from 61.1 to 59.2 in the Eurozone, highlighting that supply chain concerns are still affecting the output. ING bank said:

“The August figure is still very strong by historical standards but shows some cooling from the July peak. This can be interpreted as a confirmation of solid growth that should keep 3Q GDP around 2% QoQ.”

Germany to see a stronger third-quarter growth

Germany will release a final confirmation reading for its second quarter GDP today and that is expected to show a 9.2% year-on-year gain. The country was affected more than its European peers from supply chain issues due to its reliance on the automotive production sector.

Despite that, the country’s finance ministry predicted a better third quarter in its attest monthly report. Gross domestic product was higher by 1.5% in the April to June quarter, according to the finance ministry. This is still far behind the UK’s 4.8% performance for that same period.

But the finance ministry said that sentiment surveys and other indicators pointed to “unbroken optimism” among businesses for the summer. The economic reopening and lower virus cases have pushed up household spending with a boom in retail sales in May and June, while hiring is also strong.

That rebound will depend on the trajectory of the virus in the Eurozone, which is still a concern. Both the UK and Europe are seeing virus cases nudge higher recently, but the worry is that colder weather is now approaching.

The EUR to GBP rate looks to have bottomed at the 0.8450 level for now and stronger German data this week could underline that support level.

The post EUR GBP Stumbles Ahead of 0.8600 Ahead of German Data appeared first on Euro Rate Forecast.