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Pound Euro (GBP/EUR) Exchange Rate Steady despite German Industrial Production Shock Slump

January 8, 2019 - Written by John Cameron

GBP/EUR Exchange Rate Rangebound as Germany Reports worst Industrial Production Figures since 2009

The Pound Euro (GBP/EUR) exchange rate is steady today and is trading within the region of €1.1145.

The Pound (GBP) stabilised against the Euro (EUR) after the release of some better-than-expected Halifax house prices figures for November, which showed a 2.2% increase against October’s -1.2% slip.

Jeremy Leaf, a former residential chairman for the Royal Institute of Chartered Surveyors, commented:

‘At first glance the Halifax numbers are really positive as they reflect a time of particular political uncertainty and the height of Brexit turmoil . . . But when taken with the recent fall in transactions it is clear that the increase has more to do with a shortage of stock rather than a bounce back in the market generally.’

The release of Germany’s industrial production figures for November revealed a sharp below-forecast fall today, coming in at -4.7% on a yearly basis, allowing the Pound Euro exchange rate to stabilise after yesterday’s losses.

The Pound has, however, remained relatively steady with investors remaining hesitant ahead of tomorrow, when the House of Commons is set to return to continue debates over Prime Minister Theresa May’s Brexit deal.

However, after yesterday’s news that over 200 MPs have signed a letter urging Theresa May to avoid a chaotic Brexit, some Pound and Euro traders fear that the divide between Parliament and the UK government could severely affect the outcome of the vote on 15 January.

Euro Pound (EUR/GBP) Exchange Rate Steadies Despite Drop in Eurozone Economic Sentiment

The Euro was weakened by a raft of disappointing ecostats today, allowing the weakening Pound to become rangebound with the single currency.

The most significant release today was the Eurozone’s business climate figures for December which fell below expectations, decreasing to 0.82 against November’s 1.04.

The Eurozone’s publication of its economic sentiment figures today proved to be generally bearish, with Peter Vanden Houte, a Chief Economist at ING, saying:

‘Let’s not beat about the bush: this is a bad report, signalling a weak fourth quarter and not promising much better for the first quarter of 2019. These figures confirm our view that the GDP growth forecast for 2019 . . . will have to be downgraded significantly. That strongly reduces the probability of a rate increase this year.’

GBP/EUR Outlook: Brexit Debates back in Focus

GBP investors will be paying close attention to Brexit discussions ahead of the imminent ‘meaningful vote’ next week, with any signs that Theresa May’s deal is struggling to gain support from Parliament potentially weakening Sterling.

The Pound is also likely to be affected by any dovish comments about the UK’s economy or over fears of a Brexit ‘no-deal’, from Mark Carney, the Governor of the Bank of England, who is due to deliver a speech tomorrow.

Tomorrow will furthermore see the release of the Eurozone’s unemployment rate figures for November, which are expected to remain static.

EUR investors, meanwhile, may be buoyed by tomorrow’s release of Germany’s trade balance figures for November which are expected to increase, potentially weakening the GBP/EUR exchange rate – although after today’s shock German industrial production figures, EUR traders may be adjusting their expectations to the downside.

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