EUR GBP Flat as Traders Await German GDP

The EUR GBP exchange rate was largely unchanged on Wednesday despite another drop in the IFO business climate survey. The leading indicator was lower for a fifth month and highlights weakness ahead of the latest restrictions. Today will see the release of German GDP, however, that is a final reading and may not deviate much from previous forecasts.

The EUR v GBP was trading at 0.8400 and this is a crossroads for the pair.

Speculation grows that Boris Johnson could be ousted

Speculation is mounting that Boris Johnson may be forced out of his position amid a series of mishaps and plummeting approval.

Around 12 MPs are said to have sent letters of no confidence in Johnson to the backbench Conservative Private Members’ Committee, also known as the 1922 Committee.

That number is still a long way from the required 54 letters to trigger a confidence vote in the prime minister. Also, Theresa May had her own no confidence vote 18 months after she lost her majority in a snap election. Johnson still has a majority in parliament despite the negative headlines.

Elsewhere, the creator of the ZOE coronavirus tracking app said there was ‘no room for smugness’ on virus numbers.

Professor Tim Spector, head of the Zoe app, which is the world’s largest virus study, said he didn’t expect a large rise in cases during the holidays.

“It looks like it’s going to stay fairly flat – hopefully not get worse before Christmas – after that I think it will get worse again,” he told Sky News.

“I think it’s going to be a story of areas of the country that have these pockets of unvaccinated people that are going to suffer the most,” said Mr Spector.

German business confidence shows further weakness

Data out on Wednesday showed the German economy had entered the recent virus wave with business confidence already slumping.

IFO business climate was lower for a fourth month and ING analysts said the, “Risk of stagnation or even recession at turn of year has clearly increased”.

The analysts also noted that Germany is imposing new restrictions and that the latest news of a coalition agreement yesterday between the SPD, Greens and FDP could speed the return of harsh restrictions.

“…the German economy was already suffering from ongoing supply chain frictions, higher inflation in general, and higher energy and commodity prices in particular. Industrial production actually shrank both in the second and third quarters, despite filled order books and low inventories,” they added.

Today will see the release of German GDP but that is a final Q3 reading and reflects a period of faltering rebound from lockdowns. The number may not deviate from previous forecasts and traders will be looking further ahead.

Europe has moved towards further virus restrictions in recent days with the Netherlands and Austria leading the way. Angry protests broke out over the weekend and that is likely to worsen moving into 2022.

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