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Pound Euro Exchange Rate Slides as UK Consumer Confidence Deteriorates

Last week’s high: €1.1345

Last week’s low: €1.1206

Weakening UK Consumer Confidence Weighs Down GBP/EUR Exchange Rate

A weaker-than-expected UK GfK consumer confidence index left the GBP/EUR exchange rate on a downtrend last week.

Uncertainty surrounding Brexit helped to drive the index to a thirteen-month low in November, suggesting that consumers were taking an increasingly cautious outlook.

Even though UK house prices showed some signs of improvement this was not enough to shore up the Pound ahead of the weekend.

The Euro struggled to capitalise on the relative weakness of its rival, however, as inflationary pressure across the currency union failed to pick up.

As both the headline German and Eurozone inflation rates eased this weakened the odds of the European Central Bank (ECB) raising interest rates in the near future.

A surprise quarterly contraction in Italian growth also put pressure on the single currency, with weaker growth casting further doubt over the viability of the proposed 2019 budget.

This limited the momentum of the GBP/EUR exchange rate ahead of the weekend as market focus turned towards the G20 summit and global trade developments.

Although the Eurozone consumer price index was confirmed to have strengthened in October this was not enough to give EUR exchange rates much of a boost ahead of the weekend.

Euro Outlook: Improved Eurozone Retail Sales to Boost EUR

If Eurozone retail sales pick up from the previous month’s stagnation in October this could encourage the Euro to push higher.

Increased domestic spending would point towards a higher level of confidence among consumers, encouraging hopes for stronger fourth quarter economic growth.

Even so, any weakness in the latest German factory orders and industrial production data may leave EUR exchange rates biased to the downside.

Unless the Eurozone’s powerhouse economy can show signs of greater resilience the single currency remains vulnerable to selling pressure.

The GBP/EUR exchange rate could also benefit if November’s UK PMIs paint a more positive picture of the domestic outlook.

Stronger growth in the manufacturing and service sectors would give the Pound a solid rallying point against its rivals, demonstrating that the economy is shaking off Brexit worries.

 

Key Events

3rd December

09:30   UK Manufacturing PMI

5th December

09:30   UK Services PMI

10:00   Eurozone Retail Sales

6th December

07:00   German Factory Orders

7th December

07:00   German Industrial Production

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

 

Jack Wiles

Currency Trader

JSW@fcgworld.co.uk

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