The struggling pound Sterling received a lifeline from weakness in the euro yesterday as the German ZEW survey was released for the Eurozone’s largest economy. With the results of the survey condemning the single currency to declines after returning the largest survey drop on record, the euro looks to struggle up ahead. The market is now keeping a close eye on the German economy as it predicts the economy is on course for recession and now being put on red alert for disaster. Meanwhile, yesterday saw the release of the UK’s unemployment figures for January. The report showed a startling increase in unemployment figures for the month. Investor jitters remained high as the UK’s struggling economic figures came in before the impact of the coronavirus is reflected in data.
Germany on Red Alert as Zew Survey Suggest Recession on the Way
The release of Germany’s ZEW survey for March saw the GBP/EUR exchange rate remain steady yesterday. The results of the survey were poor and sunk the euro as investors worried over the possibility of a recession. The Eurozone’s largest economy saw the biggest drop in the ZEW survey results since the survey began in 1991. German ZEW Expectations for March came in at -49.5, down from 8.7 in February. Consensus expectations from economists was for a less severe reading of -26.4 and the miss in expectations might explain the Euro’s underwhelming performance during yesterday’s trading session.
The struggling German economy is now on red alert for recession as the outlook for both the euro and the eurozone economy looks bleak amid the coronavirus’ impact on economic data up ahead.
GBP Sunk on Poor Unemployment Figures but UK Government Pledges Further Stimulus for Economy
Meanwhile, the UK saw its unemployment figures for January yesterday. The report showed a rise in unemployment in Britain for the first month of 2020. In response to the poor performance, GBP dropped as the figure is only set to worsen as the impact of the coronavirus is reflected in the data reports. This was one of the main concerns for investors yesterday, as the January report did not include the significant impact from the coronavirus in its numbers, meaning February and March’s data is only set to worsen on January’s figures.
UK Chancellor Rishi Sunak announced yesterday evening that the UK will pledge more resources into providing support for the UK amid the coronavirus turmoil. The stimulus will see further support for businesses and the delay of mortgage repayments for homeowners. The news helped GBP find some support.
Looking ahead, euro (EUR) investors will be keen to observe today’s release of February’s Eurozone inflation report for February. Any signs of deterioration in the bloc’s economy would further sink the single currency on rising recession fears, allowing GBP another chance to climb against the single currency.
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