Euro remains depressed against British Pound despite upbeat German GDP figures

The Euro (EUR) extends losses for the fourth consecutive day against the British Pound (GBP) on Tuesday, testing weekly lows in the 0.8550 area despite the upward revision to German Q2 Gross Domestic Product (GDP) earlier in the day.

Data from the German Federal Statistics Office revealed that the German economy grew at a 0.3% pace from April to June, above the 0.2% rate shown by preliminary estimations, and matching the first quarter’s growth, Likewise, the year-over-year figure has also been revised up, to 1%, from the preliminary 0.9% estimation, and well above the 0.4% yearly increase seen in the first quarter.

In a few minutes, the CESifo Group will release its German IFO Business Climate Index report for August, which is expected to show a slight improvement, with the sentiment about the current economic situation and the near-term expectations showing higher readings than in July.

The Pound fares better in risk-off markets

The UK calendar is thin this week, but the Pound is showing some strength amid moderate risk aversion, as the conflict in the Middle East takes a turn for the worse, after the US Government announced a new package of sanctions against Iran and threatened to use military force in the Strait of Hormuz.

Analysts at ING observe that, in the current “low volatility environment,” Sterling “is probably still enjoying some carry demand given it is one of the highest, volatility-adjusted currencies in G10.” 

Against this background, the ING experts assess that “EUR/GBP can probably hang around these 0.8550 levels for the time being,” with the cross effectively anchored as investors continue to be drawn to the Pound’s carry profile.