EUR/GBP remains steady near 0.8750, eyes on German Consumer Confidence

EUR/GBP stays muted due to market caution ahead of the German GfK Consumer Confidence Survey.
The Euro struggled following the disappointing headline German IFO Business Climate Index released on Wednesday.
Slowing UK labor market conditions and weakening global business activity may prompt the BoE to adopt a dovish policy stance.

Akhtar Faruqui FXStreet

EUR/GBP moves little as traders adopt caution ahead of the German GfK Consumer Confidence Survey, trading around 0.8730 during the Asian hours on Thursday. However, the currency cross faced challenges as the Euro (EUR) weakened following Wednesday’s weaker-than-expected German business sentiment.

The headline German IFO Business Climate Index unexpectedly fell to 87.7 in September from 89.0 in August. The data undermined the market expectations of 89.3. This came after a mixed HCOB Purchasing Managers’ Index (PMI) survey, showing Eurozone private sector growth in September, driven by stronger services as manufacturing fell back into contraction.

The EUR/GBP pair may regain its ground as the Pound Sterling (GBP) may lose ground as the latest flash United Kingdom’s (UK) PMI report indicated cooling job market conditions in the United Kingdom and weakening overseas business activity. This could push the Bank of England (BoE) toward a more dovish stance on interest rates.

The preliminary S&P Global Composite Purchasing Managers Index (PMI) eased to 51.0, against estimates of 52.7 and from 53.5 in August, indicating that overall business activity expanded, but at a moderate pace. UK Manufacturing PMI fell to 46.2, while it was expected to remain steady at 47.0. Meanwhile, Services PMI dropped to 51.9, from the previous reading of 54.2. The reading came against the market expectations of 53.5.

BoE Chief Economist Huw Pill said at a discussion organized by the Pictet Research Institute in Geneva on Tuesday, reported by Reuters, that he was more comfortable with the outlook for price pressures in Britain than he was earlier this year. "It's always a question of a balance of risks. And you know, I have been on the side of saying maybe the balance of risks is more on the inflationary side than the disinflationary side," Pill added.

Economic Indicator

GfK Consumer Confidence Survey

The GfK Consumer Confidence is a leading index that measures the level of consumer confidence in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. Generally speaking, a high reading is positive (or bullish) for the EUR, while a low reading is seen as negative (or bearish).

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