EUR/GBP is experiencing downward pressure as Germany’s GfK Consumer Confidence Survey fell to -24.7 for March, down from -22.6. This figure is below market expectations and is the lowest since April 2024, indicating ongoing economic challenges.
Traders are monitoring the European Central Bank (ECB) ahead of expected interest rate cuts. ECB officials have suggested that subdued growth reflects changing economic realities, with the potential for further reductions if inflation approaches the target.
UK Prime Minister Keir Starmer has announced plans to increase defence spending to 3% of the nation’s economic output, sourcing initial funding from cuts in overseas development spending. This marks the largest increase since the Cold War.
Germany’s consumer confidence falling further is not a good sign for the euro. People are spending less, and companies may feel this downturn soon. When confidence is weak, we often see slower growth, and that puts pressure on policymakers. With inflation still in focus, the ECB has a tough decision ahead.
Some officials have already hinted that borrowing costs might need to come down. If inflation continues easing, rate cuts could arrive sooner rather than later. That means investors need to watch economic data closely—any surprises could move prices quickly.
On the other side, the UK appears to be taking a different approach, prioritising defence spending. Keir’s plan to shift money from overseas aid may create political friction, but markets will focus on the broader economic effects. A stronger commitment to domestic investment could influence long-term growth prospects.
For traders, central bank expectations and policy changes remain the key drivers. If rate cuts in Europe happen faster than in Britain, we might see a shift in momentum. The next few weeks will likely bring more clarity, but as always, unexpected announcements can quickly change the outlook.
