Pound Sterling Euro (GBP/EUR) Exchange Rate Left Muted as Bundesbank Says Germany to Grow ‘Strongly’
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat on Monday morning. This left the pairing trading at around €1.1065.
The Euro remained flat this morning despite an upbeat monthly report from Germany’s Bundesbank.
The country’s central bank said the German economy is set for a rapid and broad-based recovery after the coronavirus crisis. Although, a coronavirus vaccine may be necessary before a complete rebound is possible.
Germany shrank by a tenth in the second quarter, although has been making a comeback as the virus has been contained. This allowed the government to ease coronavirus restrictions which boosted the economy.
The monthly report stated:
‘The clear and broad-based recovery in macroeconomic performance, which began after the low point in April, will continue.
‘The German economy should grow very strongly in the summer quarter of 2020.’
However, EUR remained under pressure as the bank warned that as the pandemic has not been contained globally, it will weigh on the country’s exports and industrial production.
The Bundesbank’s report stated:
‘This is likely to stand in the way of a comprehensive recovery in demand for German industrial products. Until an effective medical solution, like vaccination, is available, economic activity in some domestic service industries will also remain limited.’
Sterling (GBP) Muted as Britons Buy and Sell Record Number of Homes
The Pound remained flat this morning after data revealed Britons bought and sold a record number of homes.
Thanks to a pent-up demand from the coronavirus lockdown and increased demand to leave London, sales rose. This bucked the usual summer slowdown and caused a record number of homes to be bought and sold between mid-July and early August.
Rightmove’s data showed that average asking prices in August were 4.6% higher compared to a year earlier.
Added to this, estate agents also told Rightmove that buyers took advantage of the temporary exemption from property purchase taxes announced by Britain’s finance minister.
This was for homes costing up to £500,000, but demand rose across the board.
Commenting on the data, Rightmove’s director Miles Shipside noted:
‘Rather than just a release of existing pent-up demand due to the suspension of the housing market during lockdown, there’s an added layer of additional demand due to people’s changed housing priorities after the experience of lockdown.
‘The out-of-city exodus has helped push prices to record levels in Devon and Cornwall, for example, where working from home means a different lifestyle much closer to your new doorstep.’
Pound Euro Outlook: ECB and UK Inflation in Focus
Looking ahead to tomorrow’s session, the Euro (EUR) could suffer losses against the Pound (GBP) following a speech from the European Central Bank’s (ECB) Vice-President.
If Vice-President Luis de Guindos is overly dovish about the economic outlook as new coronavirus hotspots in the bloc emerge, it will weigh on the single currency.
Meanwhile, Sterling traders will be eyeing the latest UK inflation data due for release on Wednesday.
If the latest consumer prices show further signs of recovery in July after the economy suffered a record contraction in the second quarter it will buoy GBP. This will send the Pound Euro (GBP/EUR) exchange rate higher on Wednesday morning.
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