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GBP/EUR Wobbles around Opening Levels despite Strong Factory Order Growth

May 19, 2017 - Written by Minesh Chaudhari

The GBP/EUR exchange rate remains stuck around opening levels of 1.1656 today, with strength in both currencies creating a stalemate.

Data from the Confederation of British Industry (CBI) has shown that factory orders rose at the swiftest pace in May since February 2015, with the balance of the order book index increasing from 4 to 9.

Output growth climbed to the highest seen since December 2013, rising from 22 to 28, although there continue to be concerns regarding productivity and rising costs.

According to CBI Chief Economist Rain Newton-Smith;

‘The summer sun has come out early for Britain’s manufacturers. Robust demand at both home and abroad is reflected in strong order books, and output is picking up the pace.’

‘On the other side of the coin though, we have mounting cost pressures and expectations for factory-gate price rises are running high.’

Although rising elsewhere, the Euro has been unable to break above opening levels versus the Pound today.

Domestic data has been positive, with German consumer prices rising at an above-forecast 0.4% on the month and 3.4% on the year, indicating that inflation in the Eurozone’s powerhouse economy is likely to continue strengthening.

Meanwhile, the Greek Parliament has voted to approach the latest austerity measures stipulated by the country’s creditors.

This means a meeting can now go ahead on Monday that sees the desperately-needed €7.5 billion tranche of bailout funds unlocked, giving Greece enough funds to make repayments to creditors due in July.

The Greek government are now pressing for debt relief, which would help improve the country’s stability and reduce the likelihood of it defaulting on future payments by reducing its debt pile over the coming decades.

In other positive news, Portugal’s credit rating has been upheld by Moody’s at Ba1, with the outlook rated stable, thanks to the economic recovery and its improving labour market, even if government debt levels remain high.

Moody’s Vice President Evan Wohlmann explains;

‘Portugal’s credit profile is supported by the economic recovery, its return to private capital markets, the economy’s diversification and relatively high average wealth levels. Portugal’s key credit constraint relates to its very high government debt.’

Looking ahead, Monday looks set to be a quiet day for GBP/EUR, thanks to a relative lack of data.

Tuesday, however, contains finalised German GDP figures and consumption, government spending, investment and trade figures, as well as the IFO business climate, expectations and current assessment survey results.

These are followed swiftly by UK public sector borrowing figures; the deficit is expected to double on the month from -£4.36 billion to -£8.6 billion.
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