Home Business Pound Euro exchange rate: GBP/EUR flat on diminishing demand for safe-haven currencies

Pound Euro exchange rate: GBP/EUR flat on diminishing demand for safe-haven currencies

Pound Euro exchange rate: GBP/EUR flat on diminishing demand for safe-haven currencies 1

The pound was left flat against the single currency as demand for safe-havens slowed as markets continued to await further news from China on the expected economic impact of the spread of the Wuhan coronavirus. 

Risk-sensitive currencies steadied, and according to Pepperstone’s Head of Research, Chris Weston:

“The way risk is trading, people are saying that perhaps we reached peak worries, peak fear.”

Meanwhile, Wednesday’s GfK German consumer sentiment data revealed that morale in the bloc’s largest economy rose unexpectedly in February to 9.9. 

This implies that German consumers were confident about the partial agreement reached between the US and China earlier this month.  

Earlier in the month Washington and Beijing agreed to a phase one trade deal, was much needed relief for the export-dependent German economy according to GfK researcher, Rolf Buerkl.

Added to this, January’s confidence figure was upwardly revised from 9.6 to 9.7 providing the euro with some support. 

According to GfK, the brighter mood amongst consumers was largely due to a stronger propensity to buy, better income expectations and stable employment in the region.

Commenting on this morning’s data release, GfK’s Rolf Buerkl said: 

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“The positive start of the consumer climate in 2020 confirms our assessment that private consumption will continue to be an important pillar of the German economy this year.”

Meanwhile, Sterling remained under pressure this week ahead of Thursday’s Bank of England (BoE) monetary policy meeting. 

Investors continue to remain cautious about the outcome of tomorrow’s meeting, with the chance of a rate cut too close to call. 

Some economists have argued that last week’s data showing better-than-expected job creation and PMIs revealing the UK private sector returned to growth will provide some comfort to BoE policymakers. 

However, many still expect the bank’s base rate will be cut from 0.75 percent to 0.5 percent, and Bank of America’s chief UK economist, Robert Wood noted: 

“We had thought that the MPC might wait until a few months after the general election, or the chancellor’s first Budget, to make a decision on interest rates.

“But it seems as though they might want to offer a helping hand to the economy a bit sooner than expected.”

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