Tuesday’s disappointing economic sentiment data for Germany should have left the Euro weaker against the Pound, but with investors engaging in a bit of profit taking before tomorrow’s UK employment figures the Euro to GBP pairing remained moderately stronger.
The Euro to Pound exchange rate began the European session in a higher position in spite of European Central Bank stimulus speculation.
Quiet trading on Monday left the Pound little-changed against its main rivals and helped the Euro claw back some of last week’s losses.
Although the common currency came under pressure after two European officials intimated that the economic crisis in the Eurozone is far from over, the EUR/GBP exchange rate achieved a high of 0.8178.
However, as Tuesday progressed less-than-impressive confidence data left the Euro struggling slightly.
The ZEW economic sentiment survey for the Eurozone came in at 55.2 in May, down from 61.2 in April.
Germany’s ZEW economic sentiment gauge slid from 43.2 to 33.1. A reading of 40.0 had been expected.
Confidence has slipped for a fifth consecutive month, adding to concerns that price pressures are putting the Eurozone’s economic recovery in doubt.
The report prompted this response from economist Andreas Scheuerle; ‘For a few months there has been negative news like problems in the emerging markets or the strong Euro. ZEW expectations can hint at turning points in the GDP growth rate, so we should expect lower growth in the coming quarters.’
However, it wasn’t all bad news and any Euro losses were tempered as the German ZEW current situation index advanced from 59.5 in April to 62.1 this month.
Fluctuations in the EUR/GBP exchange rate were also restrained by a lack of UK news.
Tomorrow the pairing can expect to experience considerable volatility as final German inflation figures and UK employment data are published.
If the UK unemployment rate is shown to have declined from 6.9 per cent to 6.8 per cent in the three months to March the Pound may well surge against its most traded currency counterparts.
Only a strong revision to German price gains is likely to undermine Sterling’s bullish relationship with the Euro.
Industrial production figures for the Eurozone will also be of interest tomorrow. Production is expected to decline by 0.3 per cent in March, month-on-month, and be up 0.9 per cent on the year.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8172,
Euro,,US Dollar,1.3765,
Euro,,Canadian Dollar,1.4996,
Euro,,Australian Dollar,1.4744,
Euro,,New Zealand Dollar,1.5926,
US Dollar,,Euro ,0.7263,
Pound Sterling,,Euro,1.2256,
Canadian Dollar,,Euro,0.6667,
Australian Dollar,,Euro,0.6793,
New Zealand Dollar,,Euro,0.6267,
[/table]
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