EU consumer confidence readings collapse to record lows; EUR/GBP
The German GfK Consumer Confidence for August was weaker than expected with a reading of -30.6 vs and expectation of -28.9 and a lower revised reading to -27.7. The headline print was a new record low. In addition, the French Consumer Confidence for July was 80 vs an expectation of 80 and a prior reading of 82. This was the lowest reading since June 2013. Also, the Italian consumer confidence for July was 94.8 vs an expectation of 98.6 and a prior reading of 98.3. This was the lowest reading since the height of the pandemic in May 2020. The EU Consumer Confidence flash reading for July, released on July 20th, was -27 vs an expectation of -24.9 and a previous reading of -23.8. Like Germany’s GfK, this was also a record low. The final July reading is due out tomorrow.
There main reasons given for the sharp deterioration in confidence were related primary to the Russian invasion of Ukraine. The first was due to fears of low supply of natural gas. The second was fears of a recession as the war sparked inflation, specifically in energy and good. In addition, Italian was also worried about political uncertainty.
The ECB recently hiked rates by 50bps to 0.00%, despite falling consumer confidence levels and lower PMI readings. However, inflation has been red hot and the ECB had to do something to try and slow it down. The flash CPI is due out on Friday, with expectations of 8.6% YoY vs 8.6% YoY previously. Could we have hit peak inflation?
EUR/GBP broke above the channel the pair has been in since April 2021 on May 14th, near 0.8480 and went on to make a local high at 0.8729 on June 15th. The pair has been pulling back since and is currently sitting on key support at previous lows, the top downward sloping line from the long-term channel, and the 61.8% Fibonacci retracement level from the lows of March 7th to the highs of June 15th near 0.8400. If EUR/GBP breaks through the support level, the next level horizontal support is near 0.8367, then additional horizontal support near 0.8250. Below there, price can fall to the lows of March 7th at 0.8203. However, if 0.8400 holds and EUR/GBP bounces, the first level of horizontal resistance is at 0.8489, then again at 0.8585. Above there, price can move to the highs of July 22nd at 0.8679.
Source: Tradingview, Stone X
Trade EUR/GBP now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
The Euro has been on the move lower as of late. The increased inflation and fears of low supply of natural gas, combined with risk of a recession, are causing consumer sentiment in the Eurozone to fall to record lows. EUR/GBP is one of the currency pairs taking the brunt of the falling Euro. Will it continue lower? 0.8400 is a key level to watch to find out!
Learn more about forex trading opportunities.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024