The pound to euro (GBP/EUR) exchange rate saw a shake-up yesterday as the German ZEW survey was released. The report showed that the German survey hit record lows as the country received tips for an incoming recession in the first half of 2020. The euro has performed well recently mainly owing to the repatriation of euros from liquidated investor stock capital. But the tide appears to be turning for the single currency as the impact of the coronavirus looks to invade the once protected European currency. Meanwhile, the British pound saw a sink in its value following the release of its unemployment rate report for January. The report saw a rise in unemployment within the UK which did little to provide the struggling currency with support.
German ZEW Survey Returns Lowest Ever Value, Sinking Euro
Europe’s largest economy in Germany received their first timely survey of their economy which gave an account of the coronavirus outbreak. The report confirmed a substantial deterioration in business sentiment owing to the COVID-19 virus. As a result, economists are now suggesting that the largest European economy is now facing a recession.
The German ZEW expectations for March came in at -49.5, which was down from 8.7 in February. Consensus readings from the market looked for a reading of -26.4, and the large miss in expectations may explain for the euro’s poor performance throughout trading yesterday. The Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung (ZEW) measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic. The poor performance in the German survey saw the euro sink as confidence in the single currency was down across the board.
UK Unemployment Rises, Dragging GBP Down
Meanwhile, in the UK, their unemployment report for January was announced yesterday. According to data published by the Office for National Statistics (ONS) the unemployment rate rose from 3.8% to 3.9% in January after the number of people out of work rose by 62,000. The unemployment rate rise sent shivers down GBP investors spines as the decline shows a falter in the UK economy before the impact of the coronavirus is reflected. As a result, GBP sunk as investors worried about the upcoming month’s data.
Despite this deflation to the UK economy, UK Chancellor Rishi Sunak announced yesterday evening that the UK has announced further stimulus to help relieve the economy and businesses. The news prompted slight support for GBP as the market appreciated the support being provided to UK businesses.
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