Euro edges down against British Pound despite upbeat German Consumer Confidence data

• EUR/GBP rallies for the third consecutive day, yet with bulls capped below 0.8580.
• The unexpected improvement in German GfK Consumer Sentiment has failed to boost the Euro.
• Rabobank Analysts see the Euro appreciating towards 0.8700 in the next few months.

The Euro (EUR) is trading higher for the third consecutive day against the British Pound (GBP) on Thursday, but the pair keeps ticking down from session highs at the European opening time, despite the bright German GfK Consumer Sentiment data released earlier on the day. The EUR/GBP pair trades at 0.8575 at the time of writing, after hitting intra-day highs near 0.8580 during Asian trading.

German consumers' confidence for September, as measured by the GfK index, improved to -26.6, from -29.4 in August, against market expectations of a moderate deterioration to -29.6. Data from the Nuremberg Institute for Market Decisions shows that the main reasons for the improvement are a significant increase in income expectations and, to a lesser extent, a decline in the willingness to save. The institute adds that economic prospects have shown a positive development, while willingness to buy remains practically unchanged.

German macroeconomic data beats expectations

Earlier this week, German Gross Domestic Product (GDP) figures were revised up to a 0.3% quarterly growth, matching the first quarter’s economic expansion. The yearly growth was revised to 1%, above the 0.9% previously estimated and more than double the 0.4% advance seen in the previous quarter.

Beyond that, the IFO Business Climate Index improved to its highest reading in the last 12 months, with the current business assessment and the economic expectations sub-indexes beating forecasts, which has contributed to improving investors’ confidence in the outlook of the Eurozone’s leading economy.

The UK calendar has remained practically void this week, and the Pound has traded lower against most peers. The GBP/USD is on track for a 0.4% weekly decline, which has been weighing the Sterling across the board in an otherwise calm week, as investors bide their time, awaiting the Jackson Hole Symposium for further clues about the Federal Reserve's (Fed) monetary policy plans.

Strategists at Rabobank consider that "since the market still sees some risk of higher rates this year, steady policy, in line with our view, could undermine the Pound." In this context, Rabobank "maintains a 3-month EUR/GBP forecast of 0.87."