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Key Moments

Euro Supported by Firm German Data as Pound Lacks Catalysts

EUR/GBP is hovering around 0.8575 on Thursday at the time of writing, showing a marginal gain of 0.05% on the day. The Euro (EUR) is drawing modest support from a series of constructive German economic indicators, while the British Pound (GBP) is trading without a strong domestic narrative amid a light United Kingdom (UK) data schedule.

German consumer sentiment has improved heading into September. The GfK Consumer Confidence Index has risen to -26.6 from -29.4 in August, surpassing expectations for a further decline to -29.6.

These figures add to a broader run of positive German releases this week. German Gross Domestic Product (GDP) growth has been revised up to 0.3% quarter-on-quarter, aligning with the expansion recorded in the first quarter. On a year-on-year basis, growth has been revised to 1% from 0.9%, accelerating from the 0.4% increase seen in the prior quarter.

Business sentiment has also strengthened. The German IFO Business Climate Index has climbed to its highest level in 12 months, with both the current assessment and expectations components outperforming market forecasts. Collectively, the recent data portray a more constructive backdrop for the Eurozone’s largest economy.

Market participants are now focused on the European Central Bank’s (ECB) Monetary Policy Meeting Accounts, scheduled for release later on Thursday. Traders are expected to examine the details closely for any fresh indications regarding the future path of interest rates in the Eurozone.

In contrast, this week’s UK economic calendar has been relatively sparse, providing the British Pound with limited new domestic drivers. In this environment, EUR/GBP is largely steady around 0.8575, as investors balance the improving German macro picture against the absence of fresh UK data impulses.

Technical View: EUR/GBP Tests Resistance as Rebound Pauses

Market strategists at Societe Generale observe that EUR/GBP has “staged a sharp rebound after carving out an interim low near 0.8450 in July,” but note that the move higher has “stalled near 0.8585” with the pair now consolidating in a tight band. According to their analysis, “a break above 0.8585 would confirm a broader recovery towards the graphical level of 0.8610 representing the low of May and perhaps even towards the 200-DMA at 0.8660/0.8690,” while “the lower boundary of the recent range at 0.8530 may serve as a short-term support.”

In the short run, Societe Generale points out that EUR/GBP is “bid at 0.8575 after yesterday’s close above 50dma (0.8559),” with “the July high of 0.8588” marked as the next resistance area.

Rabobank: Range Trading With Mild Euro Upside Bias

Rabobank’s FX team also anticipates that EUR/GBP will remain confined to a range, stating that “we expect further range trading in EUR/GBP over the coming weeks, with a mild upside bias later in the year as fiscal realism weighs and BoE rate hike risk is further priced out.”

Within the backdrop of the “energy price crisis stemming from the Iran war,” Rabobank argues that the current environment represents “a better outcome than most forecasters had expected.” The bank reiterates that “it remains Rabobank’s central view that the MPC will continue to side-step a rate hike this year,” and cautions that “since the market still sees some risk of higher rates this year, steady policy, in line with our view, could undermine the Pound.”

In line with this policy assessment, Rabobank confirms that “we maintain a 3-month EUR/GBP forecast of 0.87.”

Euro Performance Against Major Currencies

The table below presents the percentage changes of the Euro (EUR) versus selected major currencies today. According to this snapshot, the Euro has been strongest against the British Pound.

This heat map illustrates percentage moves between the major currencies. The base currency is taken from the left-hand column, and the quote currency from the top row. For instance, selecting the Euro as the base currency on the left and moving across to the US Dollar column shows the percentage change for EUR (base)/USD (quote).