GBP/EUR: Euro Jumps vs. Pound As German Coalition Averts Collapse

Another batch of dismal German data combined with broad risk off sentiment saw the euro US dollar exchange rate hit fresh multi year lows on Tuesday. EUR/USD struck US$1.0786 before pulling back towards US$1.08 for the close. The pair continues to trade around this level in early trade on Wednesday.

Euro Under Pressure From Weak German Numbers

The euro trended lower in the previous session amid increased fears over the health of the German economy and the effect that covid-19 could have on Europe’s largest economy. Data revealed that investor sentiment plunged in February, falling to 8.7 from 26.7 in January. This was also well short of the 22 that analysts had pencilled in and painted an increasingly gloomy picture of the state o the German economy. The data provided the first clear evidence of a hit from covid-19 and showed that export intensive areas of the economy saw a sharper decline in outlook sentiment.

The weak figures come after a raft of soft German data which showed German economic growth stagnated and that the manufacturing sector experienced its worst slump in a decade in 2019.

Today the eurozone economic calendar is quiet. Investors could look ahead to tomorrow GFK consumer confidence data for further insight into the German and more broadly the eurozone economy.

Dollar Underpinned By Risk Sentiment

The dollar is trading broadly flat versus its major peers in early trade on Wednesday after advancing in the previous session amid growing fears over the impact of coronavirus. Apple warned that it wouldn’t reach its revenue target as coronavirus was affecting both supply sand demand of iPhones in China. Chinese Apple shops are either shut or on reduced hours and iPhone manufacturers around the Hubei province are taking longer to ramp up than expected.

Today attention will turn to the release of the minutes from the Federal Reserve monetary policy meeting. Not much happened at the meeting. US data has shown the US economy to be on a solid footing. Fed Chair Jerome Powell didn’t say anything new and no action was taken. As a result, investors are not expecting to see any major signals in the minutes.


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