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Pound Euro Exchange Rate Weakens Despite German GDP Contraction

Pound Euro Currency Forecast

The Pound Euro (GBP/EUR) exchange rate has weakened today despite a contraction in German GDP as concerns over the Indian variant of the coronavirus in the UK continue to grow.

At the time of writing the GBP/EUR pairing are trading around the 1.1571 level as the latest German Ifo Business Climate index rose more than expected.

Pound (GBP) Struggles Against Coronavirus Concerns

The Pound has found itself weakening against many of its major rivals today as worries over the Indian variant of the coronavirus cause concern for investors.

It comes as Austria becomes the latest country to ban direct UK flights over fears of the Indian variant.

Even more so, the UK government is advising against travel to and from the eight areas of England which have been most affected by the Indian variant of the virus, though a lack of clarity over the announcement has angered MP’s.

Layla Moran, who chairs the all-party parliamentary group on coronavirus, commented on the silent change on advice saying:

‘This is a major change to policy that will have a huge impact on people’s lives. Simply updating the government website without an official announcement is a recipe for confusion and uncertainty.’

‘Local people and public health leaders in these areas need urgent clarity from the government. Matt Hancock must come before Parliament and make a public statement to explain these new rules.’

Euro (EUR) Supported by German Ifo Business Climate

The Euro has found support against Sterling this morning despite a larger-than-expected contraction in GDP growth data from Q1.

Germany’s, the Eurozone’s largest economy,  GDP fell by 1.8% in the first quarter of 2021 below forecasts from the first estimate of a 1.7% contraction, as the country was hit with a third wave of coronavirus cases.

However, business sentiment has risen to its highest level in two years in Germany. IFO, the research institute, reports that the business climate index rose to 99.2 points in May.

IFO commented on that latest rise saying:

‘Companies were more satisfied with their current business situation. They are also more optimistic regarding the coming months. The German economy is picking up speed.’

Pound Euro Exchange Rate Outlook: German Consumer Confidence in Focus

For Euro traders, the Gfk Consumer Confidence index for June is forecast to have risen almost 6 points to -3.

Although the index is expected to remain in contraction it would be the highest reading in 6 months as the country becomes more optimistic surrounding the country’s recovery from coronavirus.

A lack of notable data from the UK will see Pound investors focusing on any further coronavirus developments in the coming days.