GBP EUR Outlook: UK GDP Data Sends Pound to Euro Exchange Rate Down & Bounces Back on German Inflation Data

April 29, 2014 - Written by Ben Hughes

STORY LINK GBP EUR Outlook: UK GDP Data Sends Pound to Euro Exchange Rate Down & Bounces Back on German Inflation Data

The Pound Sterling initially lost ground against the euro today, sending the Pound Euro exchange rate down towards the 1.2100 GBP/EUR threshold earlier, following a disappointing set of GDP figures. However, some patchy eurozone economic surveys and tame German inflation data have triggered a comeback for GBP/EUR this afternoon.

Currently, the Pound Sterling to Euro exchange rate is trading up +0.38% at 1.21813 GBP/EUR.

The UK economy expanded by 0.8% during the three months to the end of March 2014 according to official figures from the UK Office of National Statistics published earlier. Investors’ kneejerk reaction to the release was to sell-off Sterling – better was expected for the Q1 figure given the encouraging economic statistics which have been coming out of Britain, and in particular the domestic Services sector, since the turn of the year. The development sent the Pound euro exchange rate sliding to 1.2104 GBP/EUR during this morning’s European session.

However, investors amended their positions as the New York opening bell approached, sending GBP/EUR back up above the 1.2170 level a short time ago. The forward move for the Pound was driven by the realisation that UK economic activity still increased by an annualised 3.1% during the first three months of this year. This was significantly up from the 2.7% counterpart figure from Q4 2013. A marginally better than anticipated whole of eurozone Consumer Confidence survey, out earlier today, wasn’t enough to shore up support for the single currency which was engendered by weaker than anticipated Economic, Industrial and Services confidence surveys, also published in the eurozone this morning.

The primary drag on the euro this afternoon has been a lower than anticipated set of German inflation figures which revealed the rate of price rises in the eurozone’s premier economy currently stands at a lower than expected annualised 1.3%. Retail Sales and Unemployment figures from Germany, due for release tomorrow morning, are the next risk event of note for GBP EUR. Look for a strong showing to send the GBP EUR exchange rate further Southwards towards its next key psychological barrier of 1.2000 heading lower.

Updated 30/04/2014

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