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Euro Pound Sterling (EUR/GBP) Exchange Rate Flat as German Confidence Boosted by ECB Stimulus

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Euro Pound (EUR/GBP) Exchange Rate Muted as German Consumer Confidence Edges Higher

The Euro Pound Sterling (EUR/GBP) exchange rate was left muted and the pairing is currently trading at around £0.8871.

The single currency was left muted despite data revealing German consumer confidence is set to improve in October.

According to GfK, the European Central Bank’s (ECB) stimulus package is likely to boost confidence as it is expected to rise from 9.7 to 9.9 next month.

In a statement, GfK noted:

‘The ECB’s decision […] on one hand increased propensity to make purchases, on the other lowered inclination to save to its lowest level since April 2016.

‘The conditions remain in place for internal demand to continue as an essential support to economic developments in Germany, despite the weakening global situation.’

Commenting on the data, chief Eurozone economist at Pantheon Macroeconomics, Claus Vistesen said this was a ‘welcome rebound’.

However, Vistsen added:

‘In addition, the headline index is not a good indicator for neither retail sales nor consumers’ spending.

‘Consumers in Germany are now caught between the reality of a still-solid labour market overall, and a decent real wage growth, and a full-blow recession in manufacturing, which is now affecting labour market conditions in this key sector. Employment intake is slowing, marginal workers are being laid off, and work hours are being reduced all factors that should, in time, hit sentiment.’

 Sterling (GBP) Flat as Markets Expect Months of Brexit Uncertainty

The Pound was left flat on Thursday after slumping on Wednesday as investors priced in more months of political uncertainty.

Prime Minister Boris Johnson suffered another blow this week after the Supreme Court ruled he unlawfully suspended parliament.

The ruling provided a temporary boost for the UK currency as it reinforced beliefs the UK would not leave the EU without a deal at the end of October.

However, it is likely this is misplaced optimism and commenting on this Jane Foley, Rabobank strategist stated:

‘Yesterday there was some misplaced optimism that Johnson would be removed and no-deal would be further away. But what we see today is that the status quo in terms of Brexit has not altered at all.

‘But we still have Johnson in place, the opposition still doesn’t want a general election and we are still cornered with respect to Brexit, it’s taken a day for that to sink in.’

However, the news Ireland is ‘open to a Brexit extension’ likely provided Sterling with a slight upswing of support, leaving the pairing flat.

Euro Pound Outlook: Will Disappointing Consumer Confidence Leave GBP Under Pressure?

Looking ahead to the start of Friday’s session, the Pound (GBP) could continue to be left under pressure against the Euro (EUR) following UK consumer confidence data.

If September’s GfK consumer confidence slides further into contraction, the Pound is likely to fall.

However, the pairing is likely to be left muted following the release of Germany’s import prices data.

If August’s import prices continue to slide, the Euro Pound (EUR/GBP) exchange rate is likely to be left flat at the end of the week.