The EUR to GBP pair dropped by more than 100 basis points after disappointing survey report from Germany. Data from the Ifo Institute of Economic Research showed that business expectations, current assessment, and business climate dropped to the lowest levels since 2010.
The business climate index, which measures expectations of business leaders for the upcoming six months dropped to 87.7, which was lower than the consensus estimates of 95.3. This was the lowest level since September 2009, at the height of the financial crisis.
The current assessment, which is a survey that shows the current feeling of business leaders dropped to 93.3, the lowest level since April 2010. Meanwhile, the business expectations dropped to a decade low of 79.7.
These numbers are not unexpected since most German companies are currently not producing. Supply chains have been disrupted as the number of Coronavirus cases have continued to rise.
Mixed UK Inflation Numbers
The business survey data from Germany came a few minutes after the Office of National Statistics (ONS) released the UK inflation numbers for March. The numbers showed that CPI and core CPI numbers rebounded in March, rising by 0.6% and 0.4% respectively. This is after the two declined by 0.6% and 0.3% in February. Elsewhere, retail prices rose by 0.5% after falling by 0.4% in February.
Concerns of inflation have been rife in the past few days as the BOE has joined the global bandwagon of money printing. The lack of goods as companies close has also contributed to higher prices.
The EURGBP pair dropped to an intraday low of 0.9075, which was the lowest level since Monday this week. On the hourly chart, we can see that the pair is in a strong downward trend, which is confirmed by a rising average directional movement index and the double exponential moving averages. In the near term, I expect the downward trend to continue until the pair tests the ten-day low of 0.9000.