- Pound (GBP) rises as consumer confidence improves
- Recession fears limit GBP upside
- Euro (EUR) falls as German economy stagnates
- Christine Lagarde to speak later today
The Pound Euro (GBP/EUR) exchange rate is rising, snapping a two-day losing run. The pair fell -0.54% in the previous session, settling on Thursday at €1.1652 and trading in a range between €1.1652 – €1.1723. At 08:35 UTC, GBP/EUR trades +0.15% at €1.1675.
The pound is pushing higher after UK consumer confidence unexpectedly improved in August, almost reversing the drop in consumer confidence in July. Consumer confidence rose to -25 from -30, better than the -29 forecast.
The data suggests that pressure on household spending could be easing as inflation ticks lower. The data comes as inflation cooled to 6.8% year on year in July down from 7.9% in June. However, it is also worth noting that retail sales data last week was weaker than expected and business activity data for August raised concerns of a recession in the UK.
The market has lowered its peak rate expectations from 5.75% to 5.5% as a result of the weaker business activity data, which saw both manufacturing and services slow by more than expected.
The euro is falling after German GDP and business climate data and ahead of a speech by European Central Bank President Christine Lagarde at the Jackson Hole Symposium in Wyoming later today.
German GDP data confirmed that the economy stagnated in Q2 after the winter recession. GDP was 0% quarter on quarter, up from -0.1% in the first three months of the year. The Bundesbank has said that it expects output to remain unchanged again in the third quarter.
Separately German business sentiment deteriorated further in August. The German IFO business climate gauge slipped to 85.7 down from 87.4.
Looking ahead attention now turns to ECB President Christine Lagarde who is due to speak for the first time since the dismal PMI data. A less hawkish tone from Lagarde could pull the euro lower. Market expectations for a September hike have fallen following the PMI data earlier this week.