Pound Sterling Euro (GBP/EUR) Exchange Rate Muted despite Upbeat German IFO
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat, leaving the pairing trading around €1.1930.
The single currency edged up slightly against the Pound after German Ifo business climate data beat expectations.
February’s Business Climate Index rose to 96.1, up from 95.9 despite predictions the index would be in a long line of disappointing German data released recently. The unexpected increase in confidence provided the Euro with some support.
However, fears about the outbreak of Covid-19 becoming a pandemic increased, as new cases continued to be reported around the world.
This sent EUR lower after the temporary boost from upbeat confidence data.
Other countries such as South Korea and Italy have now been hit, weighing on EUR as markets fear the virus will dampen Eurozone growth.
Traders rushed to the US Dollar as the ultimate safe haven, and commenting on this, Nordea analyst, Morten Lund said:
‘If you expect global growth to be lower on the back of this […] it still makes sense to bet on a stronger Dollar.
‘I expect Euro/Dollar to move lower in the short term, not only because of the incidents in Italy but because the Eurozone is much more exposed to China [than the United States].’
Sterling (GBP) Flat Ahead of UK-EU Trade Talks
On Monday, the Confederation of British Industry (CBI) said the UK must not exclude its services industry from a trade deal with the European Union.
The group has urged the Prime Minister to not leave out service industries such as finance, as this is something many employers fear if the UK and EU stick to their plans.
CBI director-general, Carolyn Fairbairn stated that many companies backed the government’s objectives for talks. This includes allowing free flows of data, and getting zero trade tariffs.
She also added:
‘In other areas, how the government strikes the balance between access and control is less clear. All efforts must be made in these talks to save exporters time and money, avoiding new paperwork, costs and delays.’
Sterling has remained under pressure ahead of trade talks between the UK and EU, which are expected to start next month.
Brussels and London remain far apart on key issues. Britain has been insistent that it must be able to set its own rules for business, although the bloc wants a level playing field on several issues such as state aid and the environment.
Pound Euro Outlook: German Growth Data in Focus
Looking ahead to Tuesday, the Euro (EUR) is likely to slide against the Pound (GBP) following the release of final German GDP data.
If growth in the bloc’s largest economy stagnates as expected in the final three months of 2019, the single currency will slide.
Meanwhile, EUR could slip further following the release of February’s French business confidence data.
If confidence slumps further than expected this month, the Pound Euro (GBP/EUR) exchange rate will edge higher.