The pound surged to high of €1.1892 on Monday following disappointing German IFO data. However, sterling was unable to retain those gains and by the end of the session had slipped lower versus the euro. The pound euro exchange rate closed the session on Monday -0.15% lower at €1.1844, its third straight losing session.
The pound is holding steady versus the euro in early trade on Tuesday, which is set to be a quiet day data wise for both currencies.
The pound trended lower across the board on Monday amid a risk adverse environment and as investors looked ahead to the Bank of England rate announcement on Thursday and Brexit on Friday.
Risk sentiment declined on Monday after the Chinese authorities appear to be losing the battle to slow down the speed of the spread of coronavirus. Investors sold out of riskier assets across the board and moved money into safe haven currencies such as the US dollar and Japanese yen. The pound, which is seen as a slightly riskier currency was out of favour.
Brexit jitters are also showing signs of returning. With the UK set to leave the EU on Friday, attention will move towards the chances of the EU and UK reaching a trade deal and avoiding a hard Brexit scenario.
Today the pound could find some support from the Confederation of British Industry (CBI) distributive trade index. Analysts’ forecasts point to an uptick this month which could boost optimism surrounding the UK economy.
German Business Confidence Unexpectedly Declines
The euro managed to finish the previous session ahead of the pound, despite disappointing IFO German business confidence data. Both the business climate and expectations index unexpectedly deteriorated in January, driven by dwindling prospects in the service sector and construction sector; sectors which had supported Europe’s largest economy in recent quarters. One positive from the report was that the German manufacturing sector was showing signs of stabilizing, contracting, but at a slower rate.
With no high impacting eurozone data, euro investors could look ahead to GFK consumer confidence data on Wednesday before a slew of influential data in the latter part of the week.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 GBP = 1.13990 EUR
Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound.
Or, if you were looking at it the other way around:
1 EUR = 0.87271 GBP
In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.