GBP/EUR: Euro Jumps vs. Pound As German Coalition Averts Collapse
  • Euro (EUR) pared earlier gains after German IFO data disappointed.
  • German GDP data due on Friday
  • US Dollar (USD) trades lower versus major peers
  • Stimulus optimism is boosting risk appetite

The Euro US Dollar (EUR/USD) exchange rate is trending lower on Monday after giving up earlier gains. The pair rallied 0.75% across the previous week and settled on Friday at US$1.2167. At 09:00 UTC, EUR/USD trades -0.1% at US$1.2153, as it eases back from an overnight high of US$1.2183.

German IFO index revealed that business confidence deteriorated in January by more than forecast. The business climate disappointed with a reading of 90.1 the weakest reading since June, down from 92.1 and worse than the 92.1 expected by analysts amid surging covid cases and tighter lockdown restrictions.

The IFO index also showed a worsening of both current assessment and the expectations component signalling a very weak start to the new year for the German economy. Attention will turn to Friday’s German GDP data, when it will be revealed whether or not  the Eurozone’s largest economy managed to avoid a double dip recession. A strong manufacturing sector and strong exports could have helped Germany avoid economic contraction.

The US Dollar is trending mildly higher versus the Euro, however it is trending moderately lower versus its major peers. The US Dollar Index (DXY) trades -0.1% at the time of writing.

The US Dollar is under pressure as risk sentiment remains buoyed by US stimulus optimism and ahead of the Federal Reserve’s monetary policy meeting later in the week.

Investors remain hopeful that Joe Biden will be able to push his $1.9 trillion covid stimulus package through Congress sooner rather than later and despite some opposition from Republican Senators.

Should the additional stimulus be agreed by Congress, economists expect US economic growth to pick up to 5.8%, up from 3.2% previously.

There is no high impacting US economic data today. Investors will be looking ahead to the US Federal Reserve policy meeting announcement on Wednesday.