EUR/GBP Weekly Outlook: Key Economic Reports, German Elections, and Market Expectations
As Forex traders prepare for the week ahead, the EUR/GBP pair remains in focus, with several critical financial reports scheduled for release. Economic data from Germany, France, and the UK will provide insights into the economic performance of both the eurozone and Britain, potentially driving fluctuations in the pair’s exchange rate. Additionally, political developments in Germany could introduce new volatility, as upcoming elections may influence investor confidence in the euro.
Key Events to Watch This Week
Monday, February 24 – German Ifo Business Climate Index
The week begins with the German Ifo Business Climate Index for February, which measures sentiment among German businesses. Given recent economic challenges in Europe’s largest economy, analysts anticipate a reading slightly weaker than last month’s 85.2, reflecting continued concerns over sluggish industrial output and high borrowing costs. A softer-than-expected number could weigh on the euro.
Tuesday, February 25 – German GDP (Q4)
One of the most important releases this week is Germany’s Q4 GDP report. Preliminary estimates suggest the German economy may have contracted slightly or posted flat growth, raising concerns about a potential recession. If the data confirms another quarter of stagnation, the euro could see downward pressure against the pound.
Wednesday, February 26 – GfK German Consumer Climate (March)
The GfK German Consumer Climate Index will provide insights into consumer confidence. The prior month’s report signaled weak sentiment due to inflation and higher interest rates. Any improvement in the March reading could lend support to the euro, while a deterioration would likely reinforce bearish sentiment.
Thursday, February 27 – German Unemployment Rate (February)
The German unemployment rate for February is expected to remain steady at around 5.9%, but any surprise increase in joblessness could hurt the euro further. As one of the key indicators of economic stability, this data will be closely watched by traders.
Friday, February 28 – Multiple Reports from Germany, France, and the UK
German Retail Sales (January): Consumer spending is expected to have remained subdued, given economic uncertainty and weak wage growth.
French GDP (Q4): France’s economy likely posted modest growth, but any downside surprise could weigh on overall eurozone confidence.
UK Nationwide House Price Index (February): The UK housing market has shown resilience despite high interest rates. A stronger-than-expected reading could reinforce confidence in the pound.
Political Risk: German Elections and Their Impact on EUR/GBP
Beyond economic data, a major factor that could affect EUR/GBP this week is the upcoming elections in Germany. With increasing political instability and growing support for right-wing and populist parties, investors are watching closely for signals about Germany’s future economic and fiscal policies.
Current polling suggests that Chancellor Olaf Scholz’s Social Democratic Party (SPD) is struggling to maintain support, with opposition parties—particularly the Christian Democratic Union (CDU) and the Alternative for Germany (AfD)—gaining ground. If the elections result in a weakened SPD or a fragmented government, the euro could face downward pressure due to uncertainty about Germany’s economic direction.
Markets typically react negatively to political instability, and if there are signs of a coalition deadlock or uncertainty about future fiscal policies, the euro may weaken against the pound. On the other hand, if pro-business and fiscally conservative parties gain the upper hand, markets may interpret this as a stabilizing factor, potentially offering some support to the euro.
Market Expectations and EUR/GBP Projections
Given the upcoming reports and elections, the euro faces a challenging week, as much of the data is expected to underscore economic weakness in Germany and the broader eurozone. Meanwhile, the pound remains relatively stable, supported by signs of economic resilience in the UK. If German GDP and employment figures disappoint, EUR/GBP could trend lower, possibly testing support around 0.8520.
However, if the UK’s housing market data signals a slowdown or if Germany’s economic indicators surprise to the upside, the euro could find some support. The elections add an additional layer of uncertainty, making it crucial for traders to monitor political developments alongside economic data.
Final Thought
This week’s EUR/GBP price action will be dictated largely by economic data releases, with Germany’s GDP and employment figures standing out as the key drivers. Additionally, the German elections could create volatility, especially if the results signal political instability or uncertainty about future fiscal policies. Given the prevailing trends, the pound appears to have the upper hand unless the eurozone surprises with stronger-than-expected data or a politically stable outcome in Germany.
Bill White Says...
"In Forex trading, the numbers tell a story, but sentiment dictates the reaction. Stay ahead of the market by understanding both economic data and political risk."