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Pound Euro Exchange Rate News: GBP/EUR Rises to Six Week High as German Exports Slacken

November 8, 2018 - Written by John Cameron

Fall in German Exports Leads to Rise in Pound Euro (GBP/EUR) Exchange Rate

The Pound (GBP) has consolidated yesterday’s gains against the Euro (EUR) today and remained elevated following news that Germany’s imports and exports fell sharply in September.

Data released this morning showed that, while the Eurozone’s largest economy racked up a larger trade surplus in September, the data hid the fact that both exports and imports had fallen, with the former contracting unexpectedly by 0.8%.

This contraction has concerned Euro investors as it could point to slowing German GDP growth, and the blame has been squarely placed on slowing global demand for finished goods in the face of trade uncertainties caused by the dispute between the US and China.

Carsten Brzeski, Chief Economist ING Germany explained how today’s figures will affect the outlook for the German economy: ‘Today’s trade data ends a disappointing week for German industry. Available monthly data suggests that the economy had its worst quarterly performance in 3Q since the beginning of 2015.’

While the Pound broadly fell against most of the majors today, this unwelcome news from Germany has kept the GBP/EUR pairing on an even keel, with the inter-bank exchange rate remaining around €1.148.

Pound Kept in Check against Euro (GBP/EUR) as EC Warns of Lower UK Growth following Brexit

There was also concerning news for GBP traders today as the European Commission (EC) released a report warning of difficult times ahead in 2019 for EU member states, with the UK singled out as the country expected to post the weakest growth as a direct result of Brexit.

The report estimated that UK GDP growth would amount to only 1.2% in 2019, against an average rate of 2.0% for the EU as a whole, and far below the likes of Ireland’s forecast 4.5% growth.

More concerning still for Sterling investors is the fact that these figures are based on the assumption the UK will leave the EU with a good trade deal in place – a so-called ‘soft Brexit’. Were it to leave with no deal then the growth figure would be lower still.

GBP/EUR Exchange Rate Outlook: Will Tomorrow’s GDP Figures Give Sterling a Boost?

Markets are awaiting tomorrow’s UK GDP growth figures to see if there are any signs of the EC’s gloomy prognostications before making any sudden moves.

Q3 data is expected to show an uptick to 0.6% from Q2’s 0.4%, with any such result liable to give Sterling (GBP) a further boost in the GBP/EUR pairing, possibly elevating it as high as $1.15 if the figures truly impress.
Some analysts, however, remain unconvinced that any such boost in growth can be sustained as Brexit draws nearer, with much of the forecast-beating growth in 2018 having been ascribed to a temporary increase in consumer spending caused by the hot summer and World Cup football tournament.

Nevertheless, it’s not just GDP figures being released tomorrow; there is a whole raft of UK data due for publication, including UK trade and industrial production figures. Coming out at 9:30 in the morning, these numbers will give GBP/EUR traders something to chew on for the rest of the weekly trading session.

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