The GBPEUR exchange rate was 0.28% higher on Monday after the release of a weaker than expected German IFO number. The business sentiment index is the first of a few big releases for Europe’s largest economy this week. The UK continues to see a drop in virus cases with new cases falling for a sixth consecutive day.
The GBP to EUR trades at 1.1710 and this could be the best chance for the pair to test the yearly highs at 1.18.
German IFO numbers disappoint euro bulls
The headline German IFO Business Climate Index fell unexpectedly to 100.8 in July versus last month’s 101.7. Analysts had expected a reading of around 102.1.
Also, the Current Economic Assessment arrived at 100.4 points compared to last month’s 99.7 and 101.6 anticipated. The IFO Expectations Index, which indicates firms’ projections for the next six months, dropped to 101.2 in July from the previous month’s 103.7 reading.
The IFO survey covers 9,000 businesses and gauges their sentiment about the current business outlook.
It is a busy week for German data with the release of unemployment and inflation on Thursday. A Q2 GDP reading will also come on Friday, alongside Eurozone inflation.
UK virus figures continue to drop
The British economy is light on economic data this week and the pound versus euro exchange rate will largely be driven by European numbers. The UK is also seeing a drop in virus case figures and that is helping to support the pound sterling.
The number of new cases in Britain fell for a sixth consecutive day to just below 25,000 on Monday from over 29,000 on Sunday.
The UK has been the centre of attention for health experts and financial markets since the Prime Minister lifted almost all legal coronavirus restrictions on July 19th. Boris Johnson’s government made the call that the risk of a big wave of hospitalisations was low due to high vaccination rates.
However, businesses have said there has been a large absence of staff with many required to self-isolate due to being “pinged” by the NHS app. The number of patients in hospital in England has also increased to more than 5000 on Monday, which is the highest level in more than four months.
The week ahead is light for UK data with only mortgage approvals numbers on Wednesday, while the following day will see the German employment numbers and inflation. The reversal of the pandemic VAT changes is expected to see inflation leap to 3.2% in the economy.
The European tourist industry is also set for more confusion as France and Italy introduce a Covid-19 pass to visit landmarks and entertainment venues such as cinemas and malls. The UK is also looking at implementing the passes in September, which are unpopular with many citizens.
The GBP versus the EUR rate will now look for continued support above the 1.17 level that had contained prices for two months.