Pound Sterling to Euro (GBP/EUR) Exchange Rate Little-Moved as Consumer Confidence Tumbles

The Pound (GBP) to Euro (EUR) exchange rate was little moved to hold above the 1.25 level on Wednesday despite the publication of a number of reports, highlighting further weakness in the stagnating Eurozone economy.

Sterling saw little movement due to a lack of market moving domestic data releases and remained under some pressure following Tuesday’s disappointing Mortgage Approvals data and the report released by the Confederation of British

Industry (CBI), which showed that the UK’s Service sector business growth slowed in the second quarter.

Wednesday’s session promises to show a hat trick of disappointing data releases out of the Eurozone and saw the single currency weaken to its lowest level of the year against the Australian Dollar and US Dollar.

The first report released on Wednesday showed that consumer confidence in the Eurozone’s largest economy of Germany declined for the first time in over 1-1/2 years going into September.

According to the market research group, GfK its forward-looking sentiment index dropped from the downwardly revised figure of 8.9 to 8.6.

The drop was the biggest decline in more than three years.

‘The escalation of the situation in Iraq, Israel and eastern Ukraine as well as the gradually accelerating spiral of sanctions in Russia have now also had a negative impact on the previously extremely optimistic economic outlook of Germans,’ said GfK analyst Rolf Buerki.

Following on from the disappointing German data, came another weak report from France, highlighting concerns that the Eurozone’s top two economies are suffering from a slowdown.

According to the French Statistics Office, manufacturing sentiment fell to a reading of 96, the lowest figure seen since July 2013.

With France experiencing a slowdown and a political crisis following the resignation of the government, economists are growing increasingly concerned about the French economy.

‘Political turmoil in France bodes ill for the struggling economy in the near term. Moreover the rift within the government will diminish the public’s already limited faith in its ability to get the economy back on track,’ said Jennifer McKeown, an economist at Capital Economics.

Rounding off the hat trick of negative news was the release of Consumer confidence release from Italy, the Eurozone’s third largest economy.

Sentiment amongst the nation’s consumers fell to a reading of 101.9 in August, down from the previous month’s figure of 104.6.

With sentiment falling in all top three Eurozone economies, speculation is growing that the European Central Bank will introduce new monetary stimulus measures in order to stave off the threat of deflation and recession.